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April 18, 2002
Supply Subcommittee
House Committees
Meeting topics: 

[Page 439]

HALIFAX, THURSDAY, APRIL 18, 2002

SUBCOMMITTEE OF THE WHOLE HOUSE ON SUPPLY

1:58 P.M.

CHAIRMAN

Mr. David Hendsbee

MR. CHAIRMAN: Order, please. Good afternoon. I would like to call the meeting of the Subcommittee on Supply to order on the debate of the Estimates, 2002-03. This is day seven. The time in debate so far is 23 hours and 47 minutes. Before we reconvene with the discussion on Resolution E31, I would like to welcome the class here that I believe is from Lunenburg West.

I just wanted to explain to the classes present here today that it is a requirement of the government to present its budget for criticism and critiquing by the Opposition. It takes 80 hours of debate, 40 hours of which will be done in the Chamber and 40 hours in here. The Opposition will pick five major departments which they want to critique in the main Chamber, and that is telecast to the people and people can watch on television. In here it will be the other departments of government that don't have the higher profile of the major ones in there. In the other room, the debates will be on the Departments of Education, Health, Community Services, Economic Development, and Finance, whereas all the other departments are being done in this room.

We have had 40 hours of debate, and we are only allowed to meet for four hours a day so we can't ram it through in a short period of time; we have to do four hours a day and no more than four hours day. So there is at least 10 days of public opportunity for this to be scrutinized, not just by members of the Opposition, but the general public is welcome to attend and listen in also.

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That's one of the processes that we have. Another process that's done in this room is the Law Amendments Committee, where a piece of legislation is brought forward after sectoring in the House. The general public is allowed to come forward and make representations about what their thoughts and concerns are about any particular piece of legislation. In the very near future, I am pretty sure you are going to have some legislation about smoke-free environments. If there is anybody in your class or school or community who is concerned about smoke-free legislation, they should come here to this Chamber at an appointed time when they can make their presentations known should we have smoke-free legislation or not in this province. This is just one example of the Chamber and how it is used.

At other times the Red Room is used for ceremonial purposes, but a lot of times it is used for press conferences and committee use such as this. As you can see, we have the government on this side of the House, and we have the Opposition over here asking questions. I just wanted to let you know what we are doing here, and we will get underway.

The meeting was called to order at 1:55 p.m. The time is now almost 2:00 p.m., I will give it as 2:00 sharp as the start time. The Liberal caucus, at the end of the day you had 13 minutes allocated in your time. We are continuing the debate on Resolution E31 for the Department of Service Nova Scotia and Municipal Relations.

Mr. Boudreau, you have the floor. The time is now 2:00 p.m.

[2:00 p.m.]

MR. BRIAN BOUDREAU: I have a question in regard to the compliance officers, Mr. Minister. Apparently there was a budgetary review that was presented to you regarding the operation of the compliance division. The understanding I have is that the compliance officers themselves dispute the figures as indicated in this report. Such items as water are listed as a $500 cost. In fact, the compliance officers tell me that they do not purchase water. I would like to ask where these figures come from and if you accept these figures. I know you are in the process of making a decision on whether to contract out this service, I would like to ask, are these figures accepted by you, and do you feel that these are correct figures that are presented to you?

MR. CHAIRMAN: The honourable Minister of Service Nova Scotia and Municipal Relations.

HON. ANGUS MACISAAC: I have confidence in the figures that have been presented to me, Mr. Chairman.

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MR. BOUDREAU: Mr. Minister, then I would like to ask if - the figure of $500 for water - there are any receipts that could be provided, where this water was purchased by the compliance officers?

MR. MACISAAC: If water has been purchased, then we would be able to provide receipts. I think it's understandable that I would not have those receipts with me today, but we would undertake to provide them.

MR. BOUDREAU: Another item that they dispute is overtime pay. I believe there is a $4,000 item for overtime. In fact the compliance officers indicate to me that they are not paid overtime. I would like to ask you, could you clarify whether the compliance officers are in fact paid an overtime rate?

MR. MACISAAC: Certainly the records would indicate the answer to that, and we will take that question as notice and examine the records and provide you with the answer.

MR. BOUDREAU: I also understand that much of their equipment, particularly their vehicles, or some of the vehicles at least, are compiling a large amount of kilometres, as new vehicles have not been purchased for some time now. My question is if you decide to stay with the current compliance office, do you have any plan to replace the equipment that is required?

MR. MACISAAC: If no change occurs, then as equipment is required it will be provided, within reason of course. We do have to ensure that the service is being provided, and we would ensure that vehicles to provide that service would be available. Of course, that would become an additional cost to continue to provide the service.

MR. BOUDREAU: Could you indicate, please, is this included in your budget?

MR. MACISAAC: I understand the vehicles are all leased vehicles and, as the leases would expire, they would be replaced, where necessary.

MR. BOUDREAU: So there's no cost?

MR. MACISAAC: Yes, there's the cost of the lease, you have to pay a monthly payment for the vehicle.

MR. BOUDREAU: Is this included in the budget that you've presented?

MR. MACISAAC: Yes, that would normally be allowed for in the budget.

MR. BOUDREAU: Could you please tell me how much training costs were last year for the compliance officers?

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MR. MACISAAC: There is a number in the budget for that division. It is approximately $11,000 - it is $10,600, I believe.

MR. BOUDREAU: In regard to the assessment officers, I believe you indicated last week there was no money in your budget for the continuation of the operation as it stands today, is that correct?

MR. MACISAAC: The amount of money that would be required for the assessment service is recovered from the municipal units.

MR. BOUDREAU: What about the cost of the new computer system, is that included in this budget?

MR. MACISAAC: There is approximately $1.5 million allowed for in the budget for that purpose.

MR. BOUDREAU: Is that enough, Mr. Minister, or do the municipalities cost-share this computer system purchase?

MR. MACISAAC: That's our estimate as to what a new system would cost.

MR. BOUDREAU: So in fact the municipalities are not being charged for the system that you are putting in place, is that correct?

MR. MACISAAC: We have not made any commitments to purchase the new system at this juncture.

MR. CHAIRMAN: You have five minutes remaining in your time.

MR. BOUDREAU: Well, you do have $1.5 million in your budget allotted for that purpose if you deem it necessary, is that correct?

MR. MACISAAC: Yes.

MR. BOUDREAU: Could you indicate what you intend to do with the money if you don't use it for this purpose?

MR. MACISAAC: I'm sorry, I missed the question.

MR. BOUDREAU: Could you indicate what you intend to do with this money if, in fact, you do not use it for the purpose that you intend to?

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MR. MACISAAC: No firm decision has been made with respect to that at this juncture.

MR. BOUDREAU: So it will be spent in other areas, or would it go back into the general fund?

MR. MACISAAC: It would be a recovered cost, so if we don't spend it then we would not recover that cost. Because the municipal units will be paying for it, if we don't spend it we would not charge them for that amount of money.

MR. BOUDREAU: But what happens to the money if you don't spend it this year?

MR. MACISAAC: It doesn't see the light of day, I guess.

MR. BOUDREAU: So in reality your budget perhaps has a million dollars to manoeuver?

MR. MACISAAC: You have to understand that if the decision is made to spend $1.5 million, then that will be recovered from the municipal units. If the decision is not taken to spend $1.5 million, then we would not recover the money from the municipal units.

MR. BOUDREAU: And how would the money be recovered? What type of formula do you intend to use?

MR. MACISAAC: We bill the municipal units based on the service that we provide to them, and I guess it's prorated relative to the (Interruption) We recover the money based on uniform assessment and population. It's a formula incorporating both of those items and, if you look at the estimate, you will find that last year we did not spend that amount of money. I think it was about $1.2 million, and because we didn't spend it then we didn't recover it. We have only billed the municipal units $12 million for the service last year, and if the money is spent then of course we would recover that money from the municipal units based on the formula, which is a combination of uniform assessment and population.

MR. BOUDREAU: So if you don't use the money . . .

MR. MACISAAC: I'm sorry, it's not population, it's assessment accounts, the number of properties.

MR. BOUDREAU: Yes. So that money though is precisely for your department, that $1.5 million that you may not use. So, in fact, if you don't spend that money it goes back into the general revenues, is that correct . . .

MR. MACISAAC: No.

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MR. BOUDREAU: . . . or does it stay within your budget?

MR. MACISAAC: If we don't spend it, we don't collect it. So if we don't collect it, it doesn't exist.

MR. BOUDREAU: So you don't spend it unless you collect it?

MR. MACISAAC: That's right.

MR. BOUDREAU: That basically concludes our questioning, Mr. Chairman, and we're now prepared to allow the minister to be free I guess.

MR. CHAIRMAN: Are there any further questions for the minister from the NDP caucus?

MR. GRAHAM STEELE: No thank you, Mr. Chairman, thanks to the minister and his staff.

MR. CHAIRMAN: Are there any questions from the government caucus?

Hearing none, Mr. Minister, I invite you to make any closing remarks to the committee and thank you for your time in estimates.

[2:15 p.m.]

MR. MACISAAC: Mr. Chairman, I want to thank the members for their examination of our estimates, for their questions and for their suggestions. We certainly value the suggestions that they've brought forward, and I again want to indicate to all members of the committee that if ever the department can be of service to them, as they represent their constituents and represent the interests of the people of Nova Scotia, our doors are always open, and again I want to thank the staff for their efforts in assisting me with the defence of the estimates before the committee today. It goes without saying that the information we've been asked to assemble for you, we will assemble that and make it available through the Chairman and through each of your caucus offices.

MR. STEELE: Through you, Mr. Chairman, would you have an approximate time frame, when we might expect to see any information that has been requested and promised?

MR. MACISAAC: I'm told we should have it within two weeks. I'm very hesitant to give timelines, but we will do our best to make sure that you get it within that time frame.

MR. BOUDREAU: . . . information as quickly as possible as has been traditionally the case in these matters.

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MR. CHAIRMAN: Mr. Chataway, the member for Chester-St. Margaret's.

MR. JOHN CHATAWAY: This is not a long oration, but I certainly, the impression that I get as an MLA, the good work of the people in Service Nova Scotia and Municipal Relations, Mr. Minister, I think you certainly deserve a compliment, and the people in that department. Keep up the good work and we're certainly behind you.

MR. MACISAAC: Thank you, Mr. Chairman, and members of the committee.

MR. CHAIRMAN: Shall Resolution E31 carry?

Resolution E31 is carried.

I would like to call upon now the minister responsible for Natural Resources. The minister is en route, and I will read into the record while we're waiting for the next team to get into their positions.

Resolution E11 - Resolved, that a sum not exceeding $57,028,000 be granted to the Lieutenant Governor to defray expenses in respect of the Department of Natural Resources, pursuant to the Estimate.

MR. CHAIRMAN: As well, we're dealing with Resolution E40.

Resolution E40 - Resolved, that the business plan of Nova Scotia Harness Racing Incorporated be approved.

MR. CHAIRMAN: So we're doing those two resolutions with the honourable Minister of Natural Resources, Ernest Fage. (Interruption)

It is started once I call the resolution forward. The team is just getting in place. Your clock doesn't start until I acknowledge you. The honourable minister is present. Minister Fage, we ask you to come forward to make your opening remarks and introductions of your senior staff. I ask you now to take the floor and present your estimates for the Department of Natural Resources, as well as the Nova Scotia Harness Racing Incorporated. Your time is 2:17 p.m.

The honourable Minister of Natural Resources.

HON. ERNEST FAGE: Mr. Chairman, first of all, I want to let you know how pleased I am to be here today to present the budget for the year 2002-03 on behalf of the Department of Natural Resources. First, I would like to introduce two staff members here today who will be assisting me. On my immediate right I would like to introduce Dan

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Graham, Deputy Minister of Natural Resources, and on my left is Kevin Boylan, the Budget Manager for the Department of Natural Resources.

Mr. Chairman, the natural resources industries are recognized as vital to the province and particularly to rural Nova Scotia. The province's economic growth strategy, as well Opportunities for Prosperity, outlines the valuable contributions our traditional or foundation industries have made in helping to build this province and how these industries will continue to make significant contributions to the future of Nova Scotia.

The mission of the Department of Natural Resources focuses on the road ahead. The department is driven to build a better future for Nova Scotians through responsible natural resource management. How do we plan to get there? It's reflected in the goals the department has set out for itself, and these goals, Mr. Chairman, include achieving sound natural resource stewardship, conserving the diversity of Nova Scotia's natural environment, supporting Nova Scotia's economy through the sustainable development of natural resources, improving the quality of life in Nova Scotia, and managing the department's financial, physical, human and information resources effectively and efficiently. The various branches of the Department of Natural Resources work to ensure that these goals are supported in all the programs, activities and policies the department develops and/or is involved in.

The department consists of six branches: the Planning Secretariat, the Minerals and Energy Division, Renewable Resources, Land Services, Regional Services and the Resources Corporate Services Unit. I would like to take just a couple of minutes on the roles of the different branches.

First of all, the Planning Secretariat ensures that policies and plans developed within and across the department are coordinated and support the goals of the department and the overall strategic direction of government. The secretariat also provides a range of administrative planning, research, information management, information distribution, graphic cartography, communications and occupational health and safety services.

The Minerals and Energy Division is responsible for policies and programs that deal with exploration, development, management and efficient use of mineral and energy resources. The concepts of environmental responsibility and sustainable development, as well as stewardship of and planning for the mineral and energy resources sector are also promoted by the department.

The Renewal Resources Division is responsible for the development and implementation of programs, strategies and plans for the sustainable management of Nova Scotia's forests, parks and wildlife resources. This branch takes a lead in industrial development, resource inventories and research, and forest protection.

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The Land Services Division administers and controls the 3.5 million acres of provincial Crown land in Nova Scotia. It provides services and achieves leadership on all land-related aspects of the department's mandate.

The Regional Services Division is responsible to the Natural Resources Department for this province's resource-based industries and many of our projects and programs of rural-based initiatives. Our Regional Services Division ensures that natural resources services are delivered through our various field offices throughout the province. The delivery of these program services include forest management; Crown land surveys; geological surveys; educational services; enforcement; hunting safety; forest fire prevention, detection and suppression; monitoring of insects and diseases; operation and maintenance of provincial parks; and conservation efforts.

Finally, the Corporate Services Unit, which is basically with Natural Resources, provides financial, human resources information and technology-related services to the Department of Natural Resources, as well as the Department of Agriculture and Fisheries, the Department of Environment and Labour, the Emergency Measures Organization, the Petroleum Directorate and, as well, the Department of Finance.

The work each of these branches undertakes not only helps the department achieve its goals, it extends further the support of government's overall theme, in particular to keep Nova Scotia's finances in order, to provide responsible and accountable governments, to create conditions that help the economy grow, and to foster an environment that allows and encourages Nova Scotians to work, live, raise families and stay in Nova Scotia. The Department of Natural Resources contributes to the realization of these themes through the sustainable and responsible management of natural resources with an eye to ensuring that Nova Scotia's natural resources will be available for future generations.

The future and our children's future is the reason for our commitment to a balanced budget this year and it is the same reason the Department of Natural Resources is committed to providing a balanced approach to the significant social, cultural, environmental and economic benefits to Nova Scotia. This balance involves dealing with the various demands on our lands and natural resources. Nova Scotia has a land base of approximately 12 million acres. About 3.5 million of this is Crown land, which the Department of Natural Resources is responsible for; therefore, the demands that are placed on our lands often outweigh the availability. That creates issues. Sometimes we see protection efforts pitted against development, recreation against harvesting.

This is why the continuation of the integrated resource management, or IRM project, is a top department priority. This enables the best options to manage and use Crown lands for both social and economic benefits. IRM is a process that balances various users and uses while ensuring sustainable resources and minimizing conflict with different interests. The process continues with the second phase, which is the development and implementation of

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long-range management plans for all parcels of Crown land throughout the provinces. These plans will provide a framework for land-use decisions and annual operating activities for the Department of Natural Resources.

Mr. Chairman, the forest industry in Nova Scotia provides in excess of 22,000 jobs. It provides $1.4 billion to our economy and it also is in increasing proportion with value added, which in 1999, $1.4 million was a 27 per cent increase over the previous year of 1998. Along with the protection sustainability of Crown lands, the Department of Natural Resources is also responsible for the geological activities, the promotion of the development of minerals and of proper and sustainable development of the entire mineral industry. As well, the Department of Natural Resources is responsible for energy development and promotion within the province.

Under that particular department, certainly the issues of green energy, greenhouse gases, CO2, climate change, Kyoto, are prime responsibilities and concerns that we share jointly with the Department of Environment and Labour and certainly are issues that not only Nova Scotians and Canadians, but worldwide have taken precedence over in the last number of years. The key integration of those achievements is very crucial to sustaining our environment, but they're also crucial to maintaining our economic development and growth strategy.

With those few brief opening remarks, I've touched a little bit on some of the department's responsibilities, areas we're involved in, and would welcome questions in regard to the 2002-03 budget estimates. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you. I understand we will be going to the questions of the NDP caucus.

The honourable member for Hants East.

MR. JOHN MACDONELL: Mr. Chairman, I want to thank the minister for his comments and the brevity of them. Not to say that I don't hang on every word that the minister says, but I appreciate, considering our previous conversation, what he has said and I do have some concerns. One thing I may not have been paying close enough attention to, but I was curious again about the numbers you said who work in the forest sector. Do you have a number there?

MR. FAGE: Approximately 22,000 people are involved, their livelihoods are a result of the forest industry.

MR. MACDONELL: Is that directly and indirectly?

MR. FAGE: Directly and indirectly.

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MR. MACDONELL: Also, its contribution to GDP, was it $1.4 billion?

MR. FAGE: Yes, $1.4 billion.

[2:30 p.m.]

MR. MACDONELL: I guess the first thing I would like an explanation of right off the top is the sustainability fund and its relationship to stewardship agreements that mills have and along with that, I would like you to answer a question. On Page 20.5 of the Supplementary Detail of the estimates, it says, under Regional Services, Forest Improvement and then on Page 20.7, under Resource Enhancement Fund, it says Forestry Development Funding. So I'm just wondering how those two are either similar or different, and is the Forestry Development Funding the sustainability fund?

MR. FAGE: In regard to your first question, the forest sustainability fund, as you know, is up and running and required details and registration, as well as estimate and summation from last year, are out there. The majority of people have filed and now we're doing our audit checks. But in round terms, approximately $14 million worth of credits have been allocated to the sustainable fund during the previous year. I will pull up those line items that you requested there. The first one was the Resource Enhancement Fund and the allocation there is $3 million and that would be equivalent to our contribution to the private lands division of reforestation or silviculture.

MR. MACDONELL: That would be your contribution to the sustainability fund.

MR. FAGE: Yes. I didn't catch the other line item you wanted.

MR. MACDONELL: It is on Page 20.5 and it says Forest Improvement. So I was just curious, is that just Crown land?

MR. FAGE: That's the same $3 million done on private lands.

MR. MACDONELL: Okay, so it's $3.135 million and the other figure is $3.232 million.

MR. FAGE: Which line item was it?

MR. MACDONELL: The one on Page 20.5, Forest Improvement, it's $3.135 million.

MR. FAGE: We weren't looking at the same numbers, so that's what was causing the confusion. That's the contribution to Crown land.

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MR. MACDONELL: Okay, that's what I thought. Then the Forestry Development Funding would be for private lands, for the sustainability fund?

MR. FAGE: That's correct.

MR. MACDONELL: Well, I have a question around the credit system. My understanding is that the department gives certain credit values for treatments. Now, in talking to people involved on the silviculture side, they're told that the credits for a treatment are not on a dollar-per-credit basis. So, in other words, if it was 650 credits to plant a hectare of forest, when they're hired to do that, they dicker with the mill on doing this job and the mill might say, we will give you $100 or $200 to plant this two hectares and they will say, no, that's 650 credits, that means $650. So they wind up doing the job for what they're paid to do it, trying to make money at it, which might be $200, and that means that the mill actually has 450 credits to the good, which they can trade or barter or give away or whatever. Am I accurate in my assumption?

MR. FAGE: In the credit system, one credit does not automatically equal one dollar. The credit system is developed through the model forest, basically a point system. This is what that particular treatment is worth, x amount of credits, if that was a thinning or a reforestation, harvest technique, all those types of things. When the contractor then bids on that particular service and this many credits were allowed, then the contractor would negotiate directly with the registered buyer how many dollars he's going to receive per hectare to do that on top of that.

MR. MACDONELL: I don't know if it's on top of that, but certainly he would negotiate with the contractor as to what they wanted to pay to do the job. So my question is, let's say that the department says to do a certain job is 650 credits. A contractor takes the job and they do it for $200. Does the mill that hired them then say we have 450 credits to the good, we got the job done, but we have 450 credits that they can trade or give away to another operation?

MR. FAGE: If they negotiated the price at $200, they would have used the 650 credits up.

MR. MACDONELL: They would have used the 650 credits up, okay. You said the model forest, so am I assuming that Nova Forest Alliance came up with those credits.

MR. FAGE: The modelling drives those credits from those various techniques and that modelling unit would use, for example, the model forest or those types of things as a demonstration project to show and come up with a relative credit value. But the actual credit development is from staff and industry in the modelling unit out of Truro.

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MR. MACDONELL: I don't know if this will seem like an obvious question, but to me, what's a credit in the real world? If you say a certain treatment is 650 credits and they negotiate and they can pay x number of dollars and that uses it up, whether they pay $200 or $650 dollars, all the 650 credits, so what's the credit? What does it mean or what's it worth? I don't understand how you came up with the credit system based on anybody getting the work done.

MR. FAGE: The credit system is based on an evaluation of what value you assign to different treatments. If we take a number of 10, as a Dewey decimal, then you assign mid-range values to each treatment. So if we do 650 in, let's say, the reforestation and the modelling is five credits, on the average, that's the average amount that would be allocated to do a reforestation project anywhere on any woodlot in Nova Scotia. The variance will come in maybe that you only have to spot-fill, so they would allow less credits and negotiate that somewhat on that particular site because you have to be able to have enough flexibility to get it site-specific. In another spot where it requires 100 per cent reforestation, then that five would have to be varied up to a higher number if a contractor is going to do it. But the credits themselves are a way to measure how much work effort and capital effort is required to do that particular phase of a silviculture or reforestation procedure.

MR. MACDONELL: So that would seem to me that someone sat down and figured out what it's going to cost to do a treatment in a general way across the board and then depending on how that particular stand varies from the standard, then they may have to pay more or less.

MR. FAGE: Absolutely.

MR. MACDONELL: Okay, so that means there actually could be a dollar value attributed to the credit system.

MR. FAGE: The reason we've gone to a credit system is to allow a specific number to the treatment as a rating system rather than assigning a dollar value to every particular treatment and not allow for the variance.

MR. MACDONELL: Let's say that we say, right off the top, five credits for a particular standard across the board considering the mean of how acreages may be across the province and we establish that depending on how much work it takes to do that based on that five-credit standard that we've set, then certainly people in the industry could say well, look, in order for me to do that job at that standard of five credits, I would have to have x number of dollars. It would seem that the credit system could be assigned so many dollars for those credits and then if it was five more credits, it would be double that. So you could relate a credit to a dollar value. I'm wondering why the department didn't do that.

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MR. FAGE: There's probably one strong reason. The department, on recommendation and working with the industry, has never been in the business of moving into the marketplace and assigning specific values of dollars. It allows the marketplace, which is the negotiation between the contractor and the registered buyer, to arrive at that price. So if the example of five is the standard credit, if the contractor feels it's a seven and the registered buyer feels that it's a six, it's up to them to settle that price and that's why we were reluctant to base it on a dollar value rather than a credit system.

MR. MACDONELL: I guess three questions have come out of that for me. One is that when you say that the department has never done that, the department did do it under the old management plans because someone from the department went out and made an assessment of the stand and then the landowner hired a contractor to come in and the department came and wrote a cheque to pay for it. So the department must have done that at some point and I guess that's the thing I'm wondering. Now that we have landowners and the mills contributing to the sustainability fund, then I think the department would be further ahead to manage the fund and pay for the treatment.

MR. FAGE: I agree with your statement, but you have to remember those were federal-provincial five-year plans where the money was all taxpayers' money. These plans involve monies coming from the roundwood buyer, the property owner and the taxpayer. The industry and the landowner have a vested interest in letting the marketplace settle it. It's not the role of the department, as we view it under those terms as the dollars or credits are supplied into that system, that we would be in a position to dictate the price. That was part of the agreement and basis that they would have influence over the rate.

MR. MACDONELL: Well, I thought the department wanted to set up a system that secured sustainability. If the contractors can't make money through their dickering with the mills, then they won't be doing the work and, therefore, the government won't hit any targets for sustainability and that to me would seem to be the whole purpose of government being involved in it at all because if it's true that the province is putting $3.232 million into the sustainability fund, then the taxpayers have an interest. I would think that the sustainability of the forest is something that taxpayers are interested in.

[2:45 p.m.]

MR. FAGE: I guess when you have a couple of years of a new program under your belt, it's easier to estimate whether it's working or not. It's very hard and you can have a long academic discussion of whether the price, if you're doing the work, rarely is it high enough and if you're paying for the work, whether it's your own house and you're having the roof replaced, it's too high. But I think it's critical that they have the opportunity in the marketplace to negotiate that. I would say though that the estimations that you would see on this program, I believe there is $10.7 million expended this year. Obviously, if $10.7 million is the expenditure of those credits, there's work being done and somebody's doing it.

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MR. MACDONELL: When you say $10.7 million, are you saying $10.7 million or are you saying $10.7 million worth of credits?

MR. FAGE: It's $10.7 million worth of dollars and that would be a combination of, again, roughly a little over $7 million coming from the private sector, which is the landowner and the roundwood buyer, and approximately $3 million coming from the Province of Nova Scotia; roughly that one-third, one-third and one-third.

MR. MACDONELL: Well, Mr. Minister, I think there are about 50 silviculture contractors in the province. So at $10 million divided by 50, it is about $200,000 a contractor. Am I wrong?

MR. FAGE: The reality of the work being done is you have a lot of stewardship agreements. You have a lot of roundwood buyers that do their own silviculture internally.

MR. MACDONELL: So that would be credits?

MR. FAGE: So it's not a true reflection to use that number because those would be made up of primarily independent contractors, not the total source by a vast amount of who's out there doing work on the land. It's difficult to use just private contractors when many of the roundwood buyers who are mill owners have their own private staff do that entire amount of work that's included in the total.

MR. MACDONELL: Okay, but what we're saying is that even if they had their private staff do that work that's included in the total, you told me $10.7 million, and you said it was real dollars, it wasn't credits, so that meant $10.7 million was spent. That means somebody got it.

MR. FAGE: Again, this is an estimate for the coming year.

MR. MACDONELL: Okay, well tell me what you spent last year.

MR. FAGE: Excuse me, that's the forecast for last year. We haven't got the exact dollars in, but that's our forecast for last year. Until we get our June at the end of the year to close off the books, that's our closest forecast right now, how much expenditure for treatments happened in Nova Scotia last year.

MR. MACDONELL: I'm getting so many questions in my head, I'm losing some of them. I'm wondering, why is it you don't have your numbers to know what to tell me in budget estimates, if the budget is supposed to be ready by the end of March; why do you have numbers coming in in June?

[Page 454]

MR. FAGE: I think you will find every government department is no different. You have until June to sign off the books. There will be adjustments - and hopefully not huge adjustments, but I think you will find that if you check with Finance that every government department or expenditures within government, their final numbers get closed off in June. The closest actual estimate when you look at the book, that's why it says forecast, not final. If you look back at the year 2000-01you will get the exact number and that's when it occurs.

MR. MACDONELL: Okay. So, when we look at this budget, we're looking at the budget for 2003, forecast basically, I mean the estimate, then we're looking back at the forecast for 2001-02, which we actually don't have until June.

MR. FAGE: We don't have the absolute, finite, right down to the cent number. You have an estimate showing there and then you have the forecast. The forecast is the closest to actual as you're going to get.

MR. MACDONELL: Okay. In your own mind, as far as that $10.7 million, how close a number is that to what was actually spent? Do you have any idea today what that would be, whether it was $9.2 million?

MR. FAGE: I'm advised it's just cleaning up any extra bills coming in.

MR. MACDONELL: That's pretty close.

MR. FAGE: It should be very close and obviously, as those last few come in, it will be slightly higher, not decreased, because this is an actual total of what you have. It's not an estimate, it's an actual total of what you have now - there may be more.

MR. MACDONELL: Okay, good. Thank you. That's helpful. Do you have any idea who got the money; the $10.7 million, give or take; any idea who got that money?

MR. FAGE: The money . . .

MR. MACDONELL: There's $3 million of taxpayers' money in that.

MR. FAGE: That would have been allocated on receipt of work done to any private contractor who does silviculture work, any mill or roundwood buyer who did work and submitted receipts that they had done that work. The audit part of it begins now. We would do spot checks to ensure that what was billed for was what happened on the land.

MR. MACDONELL: My question the other day in the House was around compliance, around the end of February, and you said now you will go out and you would audit to see that everybody's compliant. Well, how do you know if everybody's compliant because you're not really sure what was spent last year until June of this year. How are you

[Page 455]

going to be able to know who's compliant for money that looks to me like it never gets spent for awhile?

MR. FAGE: Again, they've submitted their documentation. It's virtually all there. There will be a few stragglers coming in until the end of April and then the final adjustment to the books. We go out there and randomly check that those particular preparations were done that the invoices come in for. I mean, you have a list of every contractor, every landowner, every roundwood buyer that has submitted receipts and documentation that they've done the work in the previous year. Then staff officials would go out and ensure that treatment did occur on that piece of land, yes it is acceptable. You would do it that way.

MR. MACDONELL: When you send staff out to audit the work, is that part of the $3 million? Is that what you consider part of the government's funding?

MR. FAGE: That would not come out of the fund. That goes to sustainability. That would come out of regular department budgetary financing for staff.

MR. MACDONELL: That's reassuring because it's an idea that I have that I think the department should do that and I would say that the department should control the fund really. That's what I think they should do.

I have a question around the credits. I'm not clear about them. I will tell you a scenario I was told and from what you've said, if a certain treatment was pegged at 650 credits and a contractor does it for $200 then that means those credits are gone, they're used up, no matter what. The work is done. I was told of a mill that received $80,000 worth of credits from Kimberly-Clark. This mill buys logs from Kimberly-Clark. Kimberly-Clark takes back the chips. This mill also gets $80,000 in credits from Kimberly-Clark and they actually don't have to do the work. In other words, they got the credit so they tell the department we have $80,000 in credits of work, but actually no work ever got done. Is that possible? Does that make any sense?

MR. FAGE: I'm not understanding the question.

MR. MACDONELL: I'm not sure I understand it either.

MR. FAGE: Are you talking about Kimberly-Clark . . .

MR. MACDONELL: Giving credits to a mill . . .

MR. FAGE: So are you asking about the mill or Kimberly-Clark? That's what I'm not . . .

[Page 456]

MR. MACDONELL: Well, I think it's pretty hard to ask without including them both. I guess what I want to know, can a large operation allocate credits to another operation, first of all, in terms of credits; can one operation give credits to another operation?

MR. FAGE: What is derived, when you look at all the different products that come out of a log or a stick of wood, when it's harvested to the time it's entirely processed, at the end of that you're going to end up with approximately one-third - 25 per cent to one-third is going to end up in sawdust and chips of that round log that comes in. Kimberly-Clark, which is a pulp user, would receive chips and sawdust, then would reallocate to mills, based on agreements individually with each mill, that portion of credits, approximately one-third of industrial credits, depending on source, for those chips. That's why that transfer would come that way because if it didn't, the roundwood buyer or the sawmill would have to come up with one-third of that credit source or one-third of the reforestation from a product they didn't manufacture.

In essence, it's an agreement between each mill individually. There may be some variation, that's why it's hard to put an exact percentage of rule on it because they have a private negotiation. One-third of the log goes in sawdust and chips. The pulp mill gets it, that is how they would then reimburse that roundwood buyer for 100 per cent of their commitment.

MR. MACDONELL: Okay.

MR. FAGE: And then the credits would be used on the land in proportion as to whether it was small, private, industrial or where it came from.

MR. MACDONELL: Okay, let me get this straight. In a dollar value, what is it that the mills pay per cord if they were paying into the sustainability funds, $6 or $6.50 or $3.50 per cord?

MR. FAGE: For softwood it's $3 a cubic metre.

MR. MACDONELL: At $3 a cubic metre, that's roughly $6 a cord.

MR. FAGE: We don't have the exact conversion here.

MR. MACDONELL: Is it $2.25? Anyway, that's close enough - ballpark, $6 a cord or a little better. So what we're saying is that if a sawmill buys logs from Kimberly-Clark, because they wouldn't use them in their pulp operation, then Kimberly-Clark will take chips or sawdust back from that mill, which they will use in their pulp operation. Then Kimberly-Clark - we don't have to keep using Kimberly-Clark, but that's the example that was posed to me - then a larger operation or a pulp mill can allocate credits back to the other operation based on what?

[Page 457]

[3:00 p.m.]

MR. FAGE: There are two things I think you've got involved in this, the one you're using, by the detail you're starting to supply now. You have a trade on not only chips here, but you have a trade on round logs as being allocated to another mill. Remember the key here is the registered buyer. He is responsible to the forest sustainability fund for 100 per cent of every stick of roundwood, okay. Then you have a second transaction that's occurring here. All the roundwood has to be accounted for and if that mill bought that roundwood, went to logs, then that has to be credited, if it came off Crown land, it would have to go through our sustainability fund of Crown land; if it came off private or, you know, any type of private, then it has to be credited back there.

MR. MACDONELL: Before you go further, what you're saying is that if the pulp mill cuts the logs from a landowner, then they have to pay into the sustainability fund based on what they acquire from the forests, but if the sawmill gets the log from the pulp mill, then it's their responsibility to contribute, if they're a registered buyer, to the fund the same as if the pulp mill had. Is that what you're saying?

MR. FAGE: No, it's not what I'm saying. I think you're getting confused here and trying to follow a track . . .

MR. MACDONELL: Well, I'm willing to be straightened out if anybody wants to explain it.

MR. FAGE: We would have to review every transaction because no two of them are the same. All I'm saying is if the roundwood buyer, who is the registered buyer, purchases roundwood, then they are responsible for . . .

MR. MACDONELL: Roundwood from where?

MR. FAGE: It doesn't matter. To purchase wood you have to be a registered buyer in Nova Scotia. Whether you buy that off Crown, through a secondary harvesting company, an individual contractor, if you're the roundwood buyer, that's why this system was set up that way, so it kept it easier to track and so the chip issue is a separate issue.

MR. MACDONELL: I will deal with that separately then. I guess what I think you're saying is if a registered buyer buys roundwood, but to me there's a difference between a registered buyer going out and cutting off somebody's land and buying roundwood from a private landowner let's say, and then they would have to contribute into the sustainability fund or have a stewardship agreement to have that money somehow put in place for sustainability. Is that right?

[Page 458]

MR. FAGE: Again, that's why the registered sustainability fund is in place. You're a registered roundwood buyer to buy the wood. If it comes off private land, whether you particularly own it or you're contracting to somebody else, it's all registered, all creditable and has to be accounted for.

MR. MACDONELL: Sure. Well, that's what I'm getting at. So my point I guess, where I'm going is, how many times can roundwood be credited to the fund because . . .

MR. FAGE: Once.

MR. MACDONELL: . . . if a mill buys it from a landowner, how is that different from if another registered buyer, which could be another mill, buys roundwood from a mill? Which mill pays into the fund, the one that bought it from the landowner?

MR. FAGE: It's the primary one, the first person who would buy it. And it's common in Nova Scotia because of the set-up of some operations that there would be, you know, eight-foot stock or large logs, or a specific species would be milled in another mill. The primary buyer has already been responsible for that.

MR. MACDONELL: Right, already paid into the fund so to speak.

MR. FAGE: Yes, unless, they had a secondary arrangement where another - you know, it came off this situation that you're describing, went to the mill and they had an agreement that they would carry out the credits in the silviculture for the first proponent handled in the same way.

MR. MACDONELL: So then the two issues aren't necessarily separate then, Mr. Minister. The two issues about the sawdust and the chips and the logs are not necessarily separate from the credits if they have some other arrangement?

MR. FAGE: Again, the same byproducts exist on every stick of roundwood and the individual arrangements of how they're utilized is up to those particular operators. We, with the sustainability fund, are there to ensure (a) that silviculture work occurs from the credits, and (b) that all wood has the credits or the deductions taken off to go into the fund. We do not get involved in the secondary business market arrangements between two private companies, one that may want chips, one that may want 12-foot butt stock logs, or . . .

MR. MACDONELL: I understand that, that makes sense. But something that doesn't make sense to me is when you mentioned this other arrangement business because it seemed to me that if - and I will take my pulp mill and my sawmill arrangement, and each of them buy wood from landowners and they each are responsible to pay into the fund. So the sawmill is the primary user you say or the primary buyer, but then if they don't use it in their

[Page 459]

operation and convey it to another operation, they're still responsible because they bought it from the landowner?

MR. FAGE: Again, there are two or three concepts here that seem to be blurred.

MR. MACDONELL: You're right.

MR. FAGE: First of all, if you go back to the reason, the proper allocation when the fund was set up had to occur and then while it doesn't have to be the exact piece of land that that came from that the credit happened that year because it might be three years before you wanted to do it. So if the roundwood buyer, regardless of who it is, bought 10 per cent of his product off a small private woodlot, 10 per cent of his fund activity has to go back on a small private woodlot. We have the audit system in place to ensure that the roundwood, regardless of its use, whether the whole thing got chipped, or lumber or whatever, that we have the information and are able to credit it where it should go.

MR. MACDONELL: Right, that makes sense. I will try this from another side then, because it's not clear to me. Can one operation give credits to another operation?

MR. FAGE: Yes, that's part of the basis of making the program work, absolutely. They can transfer . . .

MR. MACDONELL: If they're both registered buyers, one can give the other one credits?

MR. FAGE: If they're trading and moving stock back and forth, yes, that would be a common practice.

MR. MACDONELL: How can they do that if you're telling me that the primary buyer of the wood is responsible to pay into the fund, because if they paid into the fund, that means that there are credits that they never used to do the silviculture work that they're giving to another operation?

MR. FAGE: You settle up after 12 months, that's the requirement to have it in. If you're buyer A and you've recorded the source from where it came, you've traded me 20 per cent of what you brought in because it's a specific item I need in my mill, as long as I transfer that amount of credits back to you to use toward the fund, we've got exactly what we want.

MR. MACDONELL: So those credits back and forth, are they done on a dollar value?

MR. FAGE: We go back to where we started half an hour ago, the credits are done on the basis of what the average silviculture treatment requires for that treatment. That's why it's credits.

[Page 460]

MR. MACDONELL: Right. So, a mill either pays into the sustainability fund at the rate of $6 a cord or they have their own stewardship agreements. If they do a treatment, that treatment is evaluated at a standard of credits. So how can they barter credits, because that would mean that their contribution either into the sustainability fund or in their stewardship agreements, they really shouldn't have any credits left over to barter with, they should be doing treatments on the land based on what wood they acquire. How do they have credits to give to somebody or trade or . . .

MR. FAGE: Okay, on that particular aspect, let's look at it. They purchase wood, a different number of sources. They have deducted $3 per cubic metre. There's a credit system out there. Let's take it simplistically, five credits for doing silviculture, three credits for reforestation and eight credits for thinning; those are all in reverse order of what they might be in totality.

They can either go out there and do that much work on private lands or Crown land or wherever the source was in proportion that they got it. They will go out and do that. They can hire a private contractor, they can work under a stewardship agreement, and the 12 months rolls through. At the end of the 12 months, if they haven't caused that much work to be done or have done it themselves, to use up those credits to an equivalent of what they have brought in, then they would be responsible to pay that $3 per cubic metre what they were deficient in. Let's say they never did any work, this particular buyer, then at the end of 12 months, they would then be required to pay into the fund.

MR. MACDONELL: Right. Okay.

MR. FAGE: They have the 12 months. They're buying wood through that 12 months. They have the opportunity to either do or cause to have done the credit values that are agreed to for all those types of treatments. When the year is over, then there's the reckoning. If you've done the work, then there's no cheque required for the fund. If you're deficient in the work or having caused the work to be done, then the equivalent amount of the $3 per cubic metre that you're deficient would be required to go to the fund.

MR. MACDONELL: To go into the fund, that makes sense. What doesn't make sense - or you can say, well, it doesn't make sense because it doesn't happen - can one primary buyer allocate credits to another buyer? You just said it happens all the time, but what you just told me wasn't that.

MR. FAGE: Okay. We described the single situation, if the person was isolated . . .

MR. MACDONELL: A primary buyer.

MR. FAGE: . . . and chose to - not a primary buyer, a licensed roundwood buyer.

[Page 461]

MR. MACDONELL: A registered buyer.

MR. FAGE: A registered buyer. That registered buyer in his common business practices may trade some stock with another mill owner as long as that stock went with him, he may receive credits from that other one to cover it. That's a business arrangement between them. What we're concerned about is that (a) we know how much is harvested, how many credits are there, and (b) that the work got done. The business arrangements between two entities, as long as the fund has been satisfied and the silviculture occurs, at the end of the day it doesn't matter whether it's transaction a, b or c.

As a province, in an industry, we're concerned that the sustainability work has been achieved. As long as that's recorded and we audit it on the buy side, through the registered buyer, if they want to trade stock, that's immaterial to the process. If they want to trade credits for that stock, i.e. the biggest example would be the arrangements between virtually every mill and a pulp and paper company on the chips, there's no difference between those trades, as long as the work gets done.

[3:15 p.m.]

MR. MACDONELL: That's a good point. If one mill acquires umpteen thousand credits from another mill, if one mill acquires credits from another mill, then how do you ensure the work gets done?

MR. FAGE: Because we audit it. Remember, the invoices come in . . .

MR. MACDONELL: So if that happens in June, if that trade happens in June, are you going to know the work got done in June?

MR. FAGE: Any audit system, physical or financial, the common practice is to have a time period. Again, we have a year. We require, when that year is done, that the work has been carried out or you submit money to the fund. Once the year is up, the snow is off, we send our people out to audit the work that has come in over the previous year to ensure that it was done.

MR. MACDONELL: Right. So what you're saying is there's a third step there. Either the work is carried out or you submit to the fund, or you submit your credits for the work to be carried out to somebody else and they did the work, as a third option there.

MR. FAGE: I think you're mixing apples and oranges there. Your question was how did we know that work was done and why wouldn't we audit the work before the work was done. You asked about an audit period and a time.

MR. MACDONELL: Right, how would you know?

[Page 462]

MR. FAGE: Again, we go back to the basic principle of who can do it. The registered buyer can do it. If you're a landowner and you don't want the registered buyer to do it, you want to do it yourself, you can do it. If you're a contractor, you can go negotiate those credits, the same as your initial case there. If you're a roundwood buyer, you may have your own crews and want to do it. The Act allows for independent contractors, the property owner themselves, stewardship agreements and the roundwood buyer. The important thing is the work is done.

MR. MACDONELL: Right, if there's no correlation between the credits and the dollar value, but we're taking off a dollar value of $3 per cubic metre, going into the fund or into a stewardship agreement, so how do you know that the dollars were actually spent? How do you know that $3 per cubic metre is actually being spent if the credit system has no correlation to dollars?

MR. FAGE: The dollars are deducted, the credit system is based on average treatment, as 1 to 10, if you want to use that example. The average amount of work or effort required to pick a treatment, do it, for the province, on the average is x amount of credit, developed by the model, the dollar amount above that. Then that individual roundwood buyer does it, causes to have it done or some of them may hire a contractor to do it. Then they would negotiate that contract - value would be assigned against it.

MR. MACDONELL: Okay, let's say that somebody pays - we assume they're either paying or accounting for - $3 per cubic metre for the wood they buy. They have $30,000 for 10,000 cubic metres of wood. But when they go out to do their treatments, then how is the government assured that $30,000 worth of work got done?

MR. FAGE: I guess the assurance that the work has been properly carried out and done goes back to the audit after the invoices and the receipts and the audit the year following once the books are closed in that year.

MR. MACDONELL: If they show you the receipts for what they spent and say it's $20,000, you say that $10,000 has to go into the sustainability fund.

MR. FAGE: We would have to then say you're not compliant or the work is inferior or insufficient and then we would have to assign them an adjustment, penalty or cause the work to have . . .

MR. MACDONELL: Why wouldn't they just pay into the fund? You said if the work wasn't done, they had to pay into the fund.

MR. FAGE: If they're non-compliant, it may be a little more difficult than just saying to them that you're deficient in this amount and you're required to pay into the fund. That is one of the options but that's part of the audit, making sure they're doing it right and what's

[Page 463]

the best mechanism to create it, to rectify it. Usually, in most cases, you would have to ask them to have the preparation brought up to standard which wouldn't entail putting into the fund. If all else failed and they refused, then that's probably the option we would use, but I'm just saying it wouldn't be the only option if something was deficient and in most cases, if you ran into that situation, it may not have been intentional or something else may have interfered with it, not to cause it to happen properly. Obviously, the ultimate goal is to have a good job done so you would want to go to the option of rectifying it first, rather than this amount of money going in.

MR. MACDONELL: How much time do I have, Mr. Chairman?

MR. CHAIRMAN: You have roughly five minutes left.

MR. MACDONELL: I will try to do this in five minutes. I have a question and depending on your answer, you may smooth out a number of rough spots for me. I've always been a bit curious, something I haven't been able to understand is how someone who does not sell wood to a registered buyer, but they would like to have silviculture work done on their land, what's the process to have that done, to approach a mill under their stewardship agreement let's say?

MR. FAGE: I think there are probably several options for that circumstance. One option would be a stewardship agreement with the roundwood buyer.

MR. MACDONELL: Okay, but how does that work? That's what I want to know.

MR. FAGE: A stewardship agreement would be an arrangement, a document, a contract, a legal agreement that they would sign about x amount of services are delivered in silviculture. The roundwood buyer would receive this in return over time.

Another option, remember, you as a private woodlot owner are eligible to do silviculture work on your own even though you haven't sold any roundwood off that piece of property or other ones you have bought. That's the component about not being time-specific because the treatment and a possible harvest date can have a large time span in between and that's why the requirement that is spent on the principle that's involved in the whole sustainability piece about like pieces of property is so critical.

In that circumstance, if you were the private owner and you wanted to do silviculture but you didn't want to hire a contractor, you didn't want to sign a stewardship agreement and you didn't want to go to a roundwood buyer, you apply to the sustainability fund to get the funding to do it on your own. You are eligible to apply to that sustainability fund because if you're a small-private landowner, small-private is spent back on small-private. So, if you desired to do it on your own, you would apply for those funds.

[Page 464]

Again, the same rules apply. Let's say it was commercial thinning, worth this many credits, you'd apply to the sustainability fund, they would allocate it to you and you would do your work.

MR. MACDONELL: So what you're saying then is that there is a dollar value associated to the credit?

MR. FAGE: I don't know how . . .

MR. CHAIRMAN: Two minutes.

MR. FAGE: . . . to explain the dollar value if you absolutely want to think in those terms, it's a variable dollar. It's not a $1/one credit system. It's a negotiated system.

MR. MACDONELL: But if I were a landowner and I applied to the sustainability fund and wanted to do the work myself, I would be applying to the government really, would I not?

MR. FAGE: You would be applying to the sustainability fund. You may think it is a 600 credit job because the ground's a little uneven and you're not a professional, it's going to take you longer so you think you need 900 credits. The staff would maybe say, no, a regular contractor could do that for 450, you would still be dealing in a system that assigns points based on individual circumstances, site-specific points on an average, yes, it's worth that, but you may be a plus- or a minus-two because your situation is that much better or that much worse.

MR. MACDONELL: But what you're really saying is, if I applied and somebody came out and said here's what this is worth, it would have to be a dollar value based on those credits. There's no way of getting around that. That's what you're saying.

MR. FAGE: At the end of the day, there will always be a dollar value, but the amount of credits is what will determine the dollar value. It won't be the dollar first, it will be how many credits required to do the preparation on that particular site.

MR. MACDONELL: Thank you, minister. That didn't make any sense but I know I've whipped this horse about as long as it can stand. Anyway, I would like to come back and I know some of my other colleagues have questions and I don't want to cut them off, but I would like to come back if I can do that. Thank you, I appreciate it.

MR. FAGE: Thank you very much.

MR. CHAIRMAN: Now for questions from the Liberal caucus.

[Page 465]

The honourable member for Victoria.

MR. KENNETH MACASKILL: Welcome to the hot seat, Mr. Minister and staff. I hope my dialogue can be as entertaining as that of my good friend, the member for Hants East. He always likes to be controversial.

Mr. Minister, let me begin with your statement of last year. I will read the quote to you that I prepared, taken from Hansard of April 19, 2001. "The mission of the Department of Natural Resources focuses on the road ahead, of course. The department is driven to build a better future for Nova Scotians through responsible natural resources management. The whole issue of sustainability with our forests is paramount with the department and it is certainly paramount with this government, to ensure that sustainable use of the forestry is there so that this renewable resource will continue to provide that base of employment in rural Nova Scotia, as well as social and recreational aspects that our forests provide to all citizens of Nova Scotia." I want to come back to that recreational aspect of it later.

[3:30 p.m.]

What I'm getting at I guess is what the department's plans are for this year, 2002-03, and as we look at the figures presented today of 22,000 people employed and probably a $1.4 billion level of revenue, I notice that has not changed much over the last three or four years. In your view, Mr. Minister, do you see a sustainable forestry, sustainable in terms of reforestation and protection as well as providing that same level of jobs for the next number of years?

MR. FAGE: A very good and insightful question when you look at the opportunities out there, but the important thing is that they're opportunities, as you've mentioned, that can be there next year and for the next generation. When we look at some of the things that have affected and impacted upon the forest industry in the last year, certainly issues dealing with the U.S. have affected the markets and the stability of them and other general economic issues associated with September 11th, and availability of supply in making sure that it's sustainable, I think, are key issues that the department and all Nova Scotians wrestle with and consider.

I think it's very important as a government and as a department that we make a strong commitment to sustainability and certainly when you look at the AGFOR report that was commissioned several years ago, it clearly indicated that Crown land was sustainable, that large-industrial holdings were sustainable, but we were not in a sustainable position in the smaller private woodlot landowner section in this province. When we look at this province, where it's approximately 75 per cent privately owned, obviously some of that is large-industrial, but it gives us all an indication of why it's so important to move forward on the sustainability section of that and that's why, certainly under the previous administration and this administration, it has been key to move forward on that sustainable forestry fund and

[Page 466]

making sure from both the private and the government sector that we commit those funds to sustainable work as in reforestation, silviculture.

I do believe that we can maintain a healthy industry that employs the numbers we have now if we ensure that we keep our eye strongly on the sustainability component and on the component of balanced use, as well, through that so there is the support of all Nova Scotians for that policy.

The registered buyers regulations dealing with water quality, wetlands, old growth, watercourses and harvesting plans, all these issues are the right steps to be taking to ensure that the sustainability issue can be addressed and we keep this industry vibrant. It is critical that we spend those funds and the industry and landowners spend those funds to get the small private woodlot section over to the sustainable category, and that can be achieved by making sure that we are working in our productive forests with silviculture treatments.

MR. MACASKILL: Mr. Minister, on Page 20.3 I want to look at Reforestation, the estimate for 2001-02, the forecast for 2001-02 and the estimate, of course, for 2002-03, and you see a reduction of $257,200.

MR. FAGE: Which Estimates Book is it?

MR. MACASKILL: The Supplementary Detail. Your estimate for 2001-02 is $392,500, the forecast for 2002-03 is $535,000, and the estimate for 2002-03 is $278,700. That's a reduction in my figures of $257,000, a decrease of over 50 per cent for Reforestation.

MR. FAGE: So the question is why is the number we're estimating for 2002-03 lower than what we had in 2001-02?

MR. MACASKILL: That's correct.

MR. FAGE: Oh, excuse me, I was confused.

MR. MACASKILL: The sustainability, of course, costs money. If we do reforestation, . . .

MR. FAGE: Yes, there are two explanations. There have been a number of forest techs transferred out of that budget in the coming year and the second reason is we're anticipating increased revenue which will be derived from more sales. We're anticipating having more orders for seedling sales this year, so we would derive more income and we have less employees involved. The $278,700, the reason that's down is there are less employees involved and that lowers our cost and there are more seedling sales anticipated

[Page 467]

this year. We have more orders for seedling sales, so that is more income and it lowers the cost to run the program.

MR. MACASKILL: So where will this balance out? Will it balance out to about the same as 2001-02, $535,000? Is that what you're saying? You're going to make up the money?

MR. FAGE: The reasons we have a smaller estimate for 2002-03 are two factors making a smaller estimate. We have less people working in that division, forest technicians, and, secondly, we have more orders and anticipate higher sales from our seedlings. So it will require less money in that division because we have increased our income for that as well. There are higher tree sales and less people working.

MR. MACASKILL: So, in other words, you are going to have less money on the spending side and more revenue on the . . .

MR. FAGE: On the income side. That's right, sir.

MR. MACASKILL: So, in other words, there will still be the same level of reforestation?

MR. FAGE: Yes.

MR. MACASKILL: Now on Forest Protection, you are estimating $1.934 million in 2001, you're forecasting $3.259 million and estimating, for 2002-03, close to $2 million. There is a reduction of $1.277 million. That's a 39 per cent decrease in forest protection. Can you explain that?

MR. FAGE: The reason the forecast for 2001-02 is substantially higher is because of the over-expenditure required to fight forest fires last year. The estimate reflects for 2002-03, bringing it back to a normal forecast.

MR. MACASKILL: So your department was over budget on forest fire protection last year?

MR. FAGE: Yes. The vast majority of that increase is the actual dollars involved in fighting a very long and very intense fire season.

MR. MACASKILL: Do you feel comfortable that the same thing could not happen this year? If you were over budget by a large degree last year, why do you cut it back for this year? Do you think you feel safe?

[Page 468]

MR. FAGE: I guess that's an extremely good question. When one budgets, and traditionally budgets for a forest firefighting season, one would pick an average number that's been used for a number of years. A year ago, the standard budget, I believe, was something over $300,000. We increased that to $550,000 last year to more accurately reflect what average costs have been for the last number of years. Last year was an exceptional year and, obviously, you're going to expend the money. If the forest fire is there, you have to fight it. Whether that's a realistic number, it's the best we can probably forecast, but if there's a forest fire, we will have to fight it and we will have to make it up.

[3:45 p.m.]

MR. MACASKILL: We will have to put it out.

MR. FAGE: Yes, we will have to make it up in our budget, the same as we did this year, in other places.

MR. MACASKILL: Since we are on the topic of firefighting, I understand from the news media that they're making changes in the firefighting equipment, the aircraft, water bombers, in New Brunswick. Aren't we part of that program?

MR. FAGE: Yes, what you're seeing with New Brunswick is a national agreement under the fire protection where there is a partnership and funds being made available from the federal government to all provinces and territories on a renewal basis over time for airborne firefighting fleets and it is our intention as a province to be involved in that. I believe this year our commitment under capital assets is the allocation of dollars to bring one new helicopter into service and continue on with that renewal program. But it's a federal initiative to all provinces and territories and each province's commitment will be whatever they're responsible for as far as airborne firefighting equipment. Ours is helicopters; New Brunswick's is planes. I believe I saw that same article. I think they're allocating two or three new planes in the coming year.

MR. MACASKILL: There was an article in the Halifax Chronicle-Herald about a week a ago. I took a copy of it: Forest industry doesn't buy uneven aged argument. I found it quite interesting. What is your view on that article? Have you read it? What are your views on even, aged harvesting?

MR. FAGE: I had the opportunity to read that article and I guess the article, if my memory serves me correctly, was generated by one small group's views on harvesting techniques and how they see the alternate opportunity to propagate and do selected thinnings and harvesting techniques, which is one technique. Obviously, the industry and proponents and their detractors have various discussions on clear-cutting as a technique. Obviously the article deals with condemning or not agreeing with if there's an uneven stand, eliminate the whole stand. Obviously, depending on what types of species are involved, what type of

[Page 469]

terrain is involved, how much is recoverable, it has a huge amount of variation, so it's very difficult to agree or disagree because, really, you have to get down to the given location and what's on that piece to determine if that would be a good management technique.

I think what the article to me really points out is there are harvesting techniques which are proper for one piece of property which wouldn't be proper for the next piece. It really highlights if you, as we move into the future, have an opportunity to provide proper forest management to a piece of property over time, you can develop the optimum technique. If you're beginning the initial, you have to deal with what you have and whether that's thinning, cutting or starting over again, that's a decision that has to be made at that point and it's very hard to apply to every case.

MR. MACASKILL: We have many contractors in the province already doing the normal pre-commercial thinning and the regular thinning that they do. The outcry towards clear-cutting, it seems to be getting stronger, at least it appears that way through media outlets. Do you think we will see the day when we may have to look more closely at our harvesting practices?

MR. FAGE: There's no question. I think harvesting practices always should and will have close scrutiny. Devising better harvesting and management techniques is a challenge that industry and government need to deal with and have to deal with. There certainly will always be applications, I think, that are applicable to given circumstances and species.

Certainly when you have the opportunity to tour different woodlots, there are some wonderful woodlots in Nova Scotia under private, independent, smaller independent ownership that are just models across the province. There are certainly larger independent or industrial holdings, you see some wonderful forest management techniques. Certainly the Crown requires harvest plans and the sustainable Registry of Buyers moves in that area. Those are all issues that are dealing with what is the best management technique, what is the best harvesting technique, not only economically but environmentally and sustainable. Certainly we're starting to see much more low-impact types of situations in the province than maybe somebody moving in and clear-cutting.

MR. MACASKILL: On the harvesting surveillance, as somebody who travels the woods quite a lot, as I do - I am an ATV fanatic - I find places where harvesting has been done. In some cases, not always, you see little blocks of cut wood in bunches. It would appear that it's probably not enough to make it worthwhile for a contractor to go back in and take this cord of wood out. Do we monitor the types of practices that these contractors do in all areas? Before you answer that, I notice areas where it's clear-cut right down to the highway. I thought there had to be a buffer zone between highways and harvesting. I thought that they weren't allowed to harvest right out to the highway. I'm wondering what type of surveillance is done on that. Do we have the resources to properly monitor the harvesting

[Page 470]

practices, or is this something that's probably the horse is out of the barn and it's too late to close the door?

MR. FAGE: I think the best way to address that is for the forest industry and private and Crown lands in Nova Scotia, and to myself as minister, one of the most significant things that has occurred is several months ago in the Province of Nova Scotia, for the first time regulations are in place that protect watercourses, that protect wetlands and as well prescribe for wildlife that yes, any given area that has been cut, that islands or clumps or representative stands have to be left for diversity of everything from insect to wildlife to flora and fauna, so that it will re-propagate on that particular harvest site.

That legislation or regulation also dealt with basal densities that have to be along watercourses, that complete harvesting and that equipment can no longer be in a watercourse or harvest on the banks of watercourses in this province, and clearly defines what they are. It is absolutely hugely significant that that covers private land for the first time, Crown land, and for the first time instead of a code of practice that really meant if you felt like doing some of those things you were describing you could, as a good management practice it's required in the Province of Nova Scotia as of February 1st.

That is hugely significant to go toward addressing some of those deficiencies that you've seen through the years when you have your ATV out, and I would see when I'm out on mine as well I might add. It was, in my view, time we moved forward on protecting watercourses, wetlands, and for the first time it's the law instead of a code of practice. I think that's hugely significant in going forward in addressing some of those issues you've raised there.

MR. MACASKILL: I think the regulations are there, Mr. Minister, but do we have the resources to police it? That's my concern.

MR. FAGE: In my mind, yes, no question. Obviously with harvesting plans, with silviculture reforestation, we have our people around the province who would be near harvesting and inspecting those sites. Even more critical, the citizens of Nova Scotia, if they see activity that they're concerned about, they're very proud of our province and our woodlands and our streams, and certainly if we receive a complaint we have our people on-site very quickly.

MR. MACASKILL: I'm going to be just giving you some general questions over the next 15 to 20 minutes. Tell me, as you recall, when I was minister we had, as one of the bigger issues, the Native harvesting. Have we done anything to reach a consensus with the Native community relative to harvesting? Are there Native harvesters out there, contractors who are taking advantage of our forest?

[Page 471]

MR. FAGE: Concerning Native harvesting, we have always been, as you were when you were minister, willing to talk about access or opportunity to contract, and certainly in some areas of Nova Scotia that has occurred. I guess on the broader issue of the entire subject, we are currently moving very close, with Aboriginal Affairs in this province and a number of federal agencies and the Native community, ready to sign a tripartite agreement where we would have the opportunity to sit down and discuss and negotiate those particular issues. The hope, obviously, would be to come up with a set of circumstances where a definition could be applied around that, and that an agreement could be reached.

MR. MACASKILL: Relative to next year, as we may or may not have a long, dry summer, do you have any threats of insect infestation on the horizon, like the gypsy moth?

MR. FAGE: As you're well aware, the brown spruce longhorn beetle that CFIA and we, in co-operation, are dealing with in Point Pleasant Park and the epicentre around here would be one we are dealing with, but the cost associated is a federal responsibility. As far as other Crown lands in the province, we're not anticipating any insect outbreak on the horizon.

MR. MACASKILL: The tussock moth is under control?

MR. FAGE: Yes.

MR. MACASKILL: And the gypsy moth?

MR. FAGE: Yes, that's the indication from staff. Having been a minister of the department, you would be fully aware, that can change if the wind blows the right way.

[4:00 p.m.]

MR. MACASKILL: And in your opinion or to the best of your knowledge, the brown spruce longhorn beetle - it's always a tongue twister that one - that's pretty well eradicated, there has been no sighting of new outbreaks?

MR. FAGE: That particular issue is one that CFIA directs and we have the industry committee, and privately the Maritime Lumber Bureau of the academic community, and people from our department on it. We can give you a much more detailed report, but to this point the entire effort has been identifying infected trees and then destroying those trees. I believe CFIA has spent approximately $4 million on that effort to this point and continue to work on that. They expect that to be at least another five- to 10-year effort for that eradication and control.

[Page 472]

Two trees had been identified outside the area, I believe, last November. They were in the Lower Sackville area. Those two trees obviously were destroyed and the entire area around Halifax here still has no roundwood leaving. It has to be no bark acceptable anywhere on the dressed lumber. It is the only type that's allowed out of this area here and Point Pleasant and the epicentre. But the two trees that were found in Lower Sackville, I believe last November, that is the largest distance from Point Pleasant Park that has ever been identified.

MR. MACASKILL: Mr. Minister, you say the trees have been destroyed. They're not marketable, are they?

MR. FAGE: The ones in Point Pleasant Park, there were a number of trees salvaged there. With that particular beetle, what CFIA requires is that absolutely all bark be removed and I believe the salvage at Point Pleasant actually had to be done on-site so that all material associated with the bark and the soft tissue area underneath the bark that's where the beetle would reproduce and would live and nourish itself. That's why they require the entire removal of the bark, but they do allow the salvage of the lumber or board material minus any bark.

MR. MACASKILL: So you remove the bark and burn it and market the log?

MR. FAGE: That's right.

MR. MACASKILL: Can I go back to your estimates for one moment on Page 20.3 on Parks Administration. You're forecasting $238,100 for 2001-02 and estimating $849,100 for 2002-03. That's an increase of $611,000. Can you explain why we have such a huge increase in administration?

MR. FAGE: What has happened there is actually allocations to different programs within that budget. If you take Parks Administration, Parks Planning, Park Design and Park Development, and deal with those numbers combined, they're virtually the same as what they were the previous year. What it is is different assigning of values within those three categories.

MR. MACASKILL: So it's a matter of branches swallowed up, is it? I see . . .

MR. FAGE: Yes, what has happened with reorganization . . .

MR. MACASKILL: Reorganization is the word I'm looking for. I see in Parks Planning it doesn't show any . . .

[Page 473]

MR. FAGE: Yes, and that has been rolled up into Parks Administration. If you take those categories dealing with parks there, Parks Administration, Parks Planning, Park Design, and take those with reorganization and roll those numbers together, they will give you virtually identical numbers as over here. The actual variance when you put those four together is $11,000 over a year.

MR. MACASKILL: I want to go to mining for a moment. You have a slight increase in the cost of lime or gypsum, whatever you call it. Has there been any backlash from the industry as we realize that gypsum is a low-price commodity which really has to be shipped in bulk, big time? Has there been any backlash from the gypsum companies relative to that increase?

MR. FAGE: The increase to gypsum actually was a 25 per cent increase which is sizeable and, obviously, when we were examining opportunities to receive more revenue, that was one of the lines that we looked at and there hasn't been an increase in that rate I believe since some time in the 1970s. So we made the decision for that to go forward. I have met with the representatives from the companies involved. I guess, obviously, my paraphrase of the meeting was a very good meeting. Obviously no one wants their costs to increase, but I guess their recommendation was one that a more advanced warning would have made it easier for them, but certainly they were here to do business in Nova Scotia and stay as long as there was a market for them.

MR. MACASKILL: I'm sure your department is well aware of the competition with foreign producers as well as synthetic gypsum or gypsum products. We have heard that over the last number of years where these gypsum companies, their profit is very small, and if they can't be competitive and if they can't ship in bulk and they can't move their stuff very cost-effectively, my understanding is they were under extreme pressure in Nova Scotia to try to compete with foreign producers. So we just hope that that won't have an effect on our gypsum producers in the province.

MR. FAGE: Yes, I'm certainly aware of those concerns and, obviously, we had a good discussion on those very points. Nova Scotia, when you look at the Carribean or Mexico, or Spain, the other primary markets, offers stability, a highly trained workforce and a number of economic issues that make us attractive.

I think on the short term, the biggest concern that was conveyed to me was probably, as you've raised, the synthetic gypsum that is a by-product of power generation and scrubbers. When you look at the volume we produce here in the province and that's new board and their various mixing components, their projections seem to indicate there looks like there will be a time period in the years ahead where the synthetic will be part of their market and decrease the amount that's required from somewhere out of natural mining from those major areas and the upgrades that have been done in the industry by the various plants,

[Page 474]

they certainly felt, and I would concur, those upgrades on the production side help our competitive position, and certainly that industry is a welcome investment to this province.

MR. MACASKILL: So at this point in time you have no backlash from the . . .

MR. FAGE: It's not my indication that we would.

MR. MACASKILL: Graves Island Provincial Park, I recall a few years ago there was a claim by somebody living close to the park about a right-of-way. Can you tell the committee, has that been settled with the landowner adjacent to Graves Island Provincial Park?

MR. FAGE: That particular park, certainly, it's our view that it is parkland and there's no question about that and, at this point, we have no intention of deeding Crown land out of a park for private use or ownership.

MR. MACASKILL: So that issue was put to rest?

MR. FAGE: Yes.

MR. MACASKILL: On Page 20.5, under Regional Services, there is a trend. Your District Offices - Central, and District Offices - Eastern have increased by over $100,000. Your District Offices - Western has increased by $400,000. Could you explain the increase of over $600,000 in these two districts?

MR. FAGE: That's the resource management and the regional - oh, you're talking district offices?

MR. MACASKILL: Yes, district offices, central and eastern.

MR. FAGE: The majority of that would be the wage increase component anticipated.

MR. MACASKILL: Parks Planning has taken a decrease in their budget of $325,000. Is that part of what you explained earlier relative to combining?

MR. FAGE: No, Parks Planning, that was all involved in those four park lines there and if you add those lines together so you can compare them year on year with the reorganization, it's out less than $11,000 to what it was before the reorganization on that particular page.

MR. MACASKILL: The Corporate Services Unit, Page 20.2, your Financial Services has increased over $250,000 since last year. Can you explain why there was such an increase?

[Page 475]

MR. FAGE: Two major components there are financial transfers from the Department of Finance as in employees and, again, the anticipated wage component increase there.

MR. MACASKILL: In your IT Services, there has been an increase of over $1.4 million. Can you explain to the committee the reason for the increase?

MR. FAGE: That one is also the employees' transfer; 21 people from the Department of Finance transferred to the IT unit at Natural Resources.

[4:15 p.m.]

MR. MACASKILL: Now can we go to deer for awhile. I'm looking at your numbers in the deer herd, particularly the kill, over the last three years, 1999, 2000 and 2001. We see a significant decline in the deer herd, at least the deer harvested or the deer killed, whatever. Can you explain? I know you can't grow deer, but I recall before, I think it was in 1998 when we opened the Antlerless Deer Draw, I think that was in 1999, I'm not sure, one of those years when we were only giving licences to hunt buck deer. Now do you plan anything to try to protect the herd?

MR. FAGE: As you are aware, the winter of 2001-02 was particularly severe so there was a drastic decline in the deer population. It was a very hard winter on them. In response to that, last year, after the counts in the Spring, the decision was made to reduce antlerless deer-hunting permits by 13,200 licences for the Fall of 2001. So that particular number really has the number of antlerless deer permits for last Fall. We've gone through this particular winter season, which is the most crucial part on deer numbers, and we are conducting those deer counts again, at this time, through the various zones and regions through Nova Scotia and once those numbers are in, then we would make the decision on antlerless deer or buck only, or whether it's male or female, and what zones you would be allowed to pursue those deer in. But until we get those numbers in this year and, hopefully, with what the winter appeared to be like, the deer possibly did very well last winter.

MR. MACASKILL: Do your scientists give a reason? Deer hunting is a very popular sport, particularly in the rural areas. It adds quite a lot to the economy. When I look at the County of Victoria and only 20 deer killed, it certainly would be a cause for concern to people involved in the sport.

MR. FAGE: There's no question, and I apologize. I don't have the exact breakdown of kills with me from last year, but the opportunity, if it's lessened in the area, many hunters will go to another zone where there is greater opportunity and, certainly, maintaining viable populations is the key role of the biologists and the recommendations that would come forward. There are areas in Nova Scotia, just as you've pointed out, that the harvest rate is low and, obviously, there can be two major things, but a number of minor things involved

[Page 476]

which are the number of licence sales and people hunting in that area, and then there is success ratio related to the population. But, certainly, that assessment on every zone on how much harvesting will be allowed, that's the highest component that there is enough population there that they can reproduce and you would see expansion, you would hope, in those areas.

MR. MACASKILL: But is it harvesting or predators that causes the decline, in your opinion?

MR. FAGE: I wouldn't speak on behalf of the biologists because I can't quote them right now, but there's no question when you have severe snow conditions in the wintertime, that is absolutely the most vulnerable time for the deer population because not only do they face the cold and starvation, also their predators have a very easy time corralling and catching them. So there's no question that we have a drop in deer population. It's rarely related to hunting pressure. It's related to availability of food supply and snow depth and the access of predators to easily get to the herd. Wintertime is when that happens, not hunting season.

MR. CHAIRMAN: You have 10 minutes remaining, sir.

MR. MACASKILL: I notice in your press release from last year, and we have the figures here and they're down significantly in every county.

MR. FAGE: In the survey, they were down last year, on average for the province, between 40 per cent and 50 per cent. In some areas the number was slightly higher than that, from the winter.

MR. MACASKILL: Now we're going to go to reindeer. As you know, there's a farm in Lewis Mills, where they have a farm of reindeer. Can you tell the committee, has that been a successful venture? Do you know about it?

MR. FAGE: There are a number of operations in Nova Scotia. They're licensed under the exotic species permits for production. I guess I would find it hard to comment on their economic viability. They're all private companies, and they have various methods or ways they can maximize their economic potential, from meat production to hide to horn production. It seemed to be a popular industry a few years ago, with a lot of interest in people getting in. By the amount of requests and interest out there, there's no question that in this province, probably the most optimistic view is it has stabilized; if you were less than optimistic, it's probably on the decrease.

MR. MACASKILL: Finally, I want to turn to the coal leases in Cape Breton. I know there's a very keen interest in the coal leases, and what the government plans to do with them when the time approaches that your department will deal with that issue. Am I correct in saying that there's a lot of interest in these leases as this point in time?

[Page 477]

MR. FAGE: No question, honourable member, there's a lot of interest. The interest is primarily, or almost exclusively at this point, centred in proposals coming from the local communities involved.

MR. MACASKILL: How many blocks of leases, as you see them, are there? I know there are the mining leases and the surface operations. Are they all in one block? How many blocks of leases are there?

MR. FAGE: I find it hard to describe in those terms. What we're dealing with here are lands or mineral rights. Obviously the surface rights, dealing with Devco, they have surface area that the federal government owns. We're actually dealing with the mineral rights, in most cases, below the surface. We're currently engaged in discussions and negotiations with the federal government. They're wishing to surrender them to the province. Obviously we're willing to accept them, but we want to make sure that the remediation and environmental issues that come with them are properly compensated for by the federal government so that the province doesn't end up with a large financial liability to ensure that correction.

I think the easiest way I could describe it is there are a number of surface or near-surface blocks, or lease opportunities instead of blocks, involved that would involve the Devco operation, as well as other ones that would involve natural resources or the mineral rights associated there, near-surface. Then there's the huge resource involved in underground, i.e. Donkin and the other related quarries there.

MR. MACASKILL: I know it's a difficult question to ask you at this point in time, but apparently there's equipment down at the Prince Mine and some people who are proponents - I guess we can use that word - would love to salvage that equipment if the leases could be made available before a certain period of time. Do you think there's a possibility that those leases will be released in the not too distant future, or in time to save that equipment that's down at Prince Mine?

MR. FAGE: There are a number of issues involved in that particular discussion. I think the first one is that Devco owns that equipment and a proponent would have to deal with the federal government; that would be the primary one. The other issue then is flooding and those issues related to recovery. At this point, ensuring that environment and remediation, the cost of that work needed to be done, stays or remains with the federal government is paramount. A decision by any proponent to recover that equipment and obtain ownership of it certainly is a discussion that they need to have with Devco or the federal government.

MR. MACASKILL: Devco has released the leases to the province, haven't they, at this point in time?

[Page 478]

MR. FAGE: No, we have not accepted the leases. They've petitioned us to return them to us. We have an obligation to ensure that remediation and environment are addressed before we accept those leases. We are in the final stage of those negotiations and discussions.

MR. MACASKILL: Thank you, Mr. Minister. Mr. Chairman, those are all the questions I have for the minister.

MR. CHAIRMAN: Your time is up a little early, but I appreciate that. Any questions from the government caucus, before we go to the Opposition again? Hearing none, we will go to the NDP caucus.

The honourable member for Cape Breton Centre.

MR. FRANK CORBETT: Mr. Chairman, I will be sharing my time with, among others, the member for Halifax Chebucto.

Mr. Minister, surprise, we're going to continue along the Devco line. I'm sure you're shocked. Caught you unaware. Mr. Minister, we've had this discussion before. I guess I've asked this question before, for the record, around, especially operations that Devco may have that they've actually operated, for instance the Prince Mine, isn't it in the best interests all around, that if you're going to hold off until you get environmental remediation work done to the province's satisfaction, to say, well, let's come up with a deal that will allow the pumps to run in Prince to make it appropriate for a couple of things: obviously easier to get at the resource, which indeed would be advantageous, obviously, to the province; and then would be advantageous to the federal government in that they could leave that equipment there with the possibility of resale to new owners, if it happened?

MR. FAGE: There's no question that those types of arrangements, if they could be achieved with the federal government, do offer some options. The situation right now, I think, though, is would proponents, who would want to look at that, want to invest the time, the money and the effort to convince the federal government to provide that resource and that expense, and that there would be a buyer for that equipment. I guess that discussion would be one that would be critical if the federal government had a proponent like that and would come forward with discussions with the proponent. That part has never happened yet.

MR. CORBETT: I appreciate what you're saying. I think there seems to be more of a pushing against each other than trying to work forward to see if there is a buyer for that facility. I guess what I'm saying is, has there ever been discussions with the federal government to say, look, while we're negotiating what you're going to do around environmental remediation, what we want you to do is to keep the pumps running in that mine so it would be easy if indeed someone wanted to buy that resource, we could sell it to them?

[Page 479]

[4:30 p.m.]

MR. FAGE: I think it's important to look at the process that the federal government has gone through here and, again, it's their equipment and their property. The federal government, if you follow their timelines or time frames, for four years actively and for two years openly, went worldwide because their option was to sell it as a going concern to a buyer. They were unable to find a buyer, do any of those types of things and sell it and that's why they want to turn the leases back to us.

Again, a proponent with the dollars to buy it and go forward wasn't identified in that process. Certainly the federal government had no appetite after going through that process to be in a situation that they want to continue to incur expense. Every time we've had discussions, they want to lower their expense.

MR. CORBETT: Well, I don't want to put words in your mouth, minister, but I guess then you're saying the possibility of Prince Mine being operated again, it's not very likely.

MR. FAGE: I certainly can't speak for private opportunities, mining companies or those types of issues. Once we have the leases back, we are more than willing and open to talk to any organization, group, company or individual that does not require financing from the Province of Nova Scotia to become involved in Prince or any other mining operation. We will enter into - surface or below surface - a tendering process to look at proposals, but one of the key tenets of those proposals is that it has to be privately funded or not funded by the Province of Nova Scotia. The province does not have the resources and is not looking to be involved in funding an operation to mine coal. We're looking to private enterprise to provide those opportunities and those expressions of interest, certainly the surface ones, are very regular which is very encouraging.

MR. CORBETT: Again, I'm trying not to put words in your mouth, but the likelihood of Prince being sold as a working operation is very minimal. The fact is that there's no active pumping of that mine if it's not operating. In my experience around mining, it appears that there are a couple of factors, that mine would be almost impossible to sell if it were flooded because of the environmental concerns around pumping it out. One could probably take an educated guess and say that a lot of people didn't want to buy those underground mines because they saw it as a large encumbrance around absorbing a larger-than-needed workforce.

With contractual obligations to its employees out of the way, I would have thought it would have made it a little easier to sell - I would say a lot easier. The fact is, to give that its best shot would be to ask the federal government, because we're talking minimal costs here of keeping pumps running until the leases were turned over to the province after successful negotiations on environmental remediation. Then we could try to market that mine.

[Page 480]

MR. FAGE: I obviously appreciate what you're asking and certainly I think when you review the opportunities there the Prince Mine, the underground operations, currently the assets are 100 per cent in federal hands. They spent a number of years searching for a buyer. None of those have been achieved. The province's immediate concern is keeping the federal government to their commitment on environmental remediation for the long-term health of the entire community and of those sites. We're negotiating through this process, but any physical expenditures or assets relating to the pumping and health and safety, all those types of things are clearly issues with the federal government, issues they would have to feel comfortable dealing with. To this point, they, because they are the owners, are calling the shots on that operation.

MR. CORBETT: I still think there can be some pressure put on. When Devco was operating, what was the per-ton royalty we got from Cape Breton Development Corporation?

MR. FAGE: The coal royalty was 25 cents a ton.

MR. CORBETT: I don't suspect you have this right at your fingertips, but could you tell me, or undertake to tell me, when we received the last cheque in royalties from the federal government and in total before they turned the leases over? How much did we get in royalties since 1968?

MR. FAGE: We will find that information for you. So, that was the amount of the cheque, the volume and the last date it was issued?

MR. CORBETT: Yes, the last one we got and the total we got in royalties since 1968.

MR. FAGE: No problem.

MR. CORBETT: A few other things before I turn it over to my colleague. The strip mining seems to be a fairly, if rumours - and I've talked to a few people who have said they're applying for leases. Indeed, Devco would have been one of the ones that had some of the larger tracts of land. Has there actually been an increase in interest and has anybody applied for leases on Devco property and off Devco property?

MR. FAGE: The process myself and staff have set up and how we've been dealing with various people who have expressed an interest is, once the negotiations are completed on the surrender of the licence with the federal government, then we will enter into a fair and open process on access to those. There has been a large amount of interest expressed from various groups and individuals on those surface opportunities there.

The other thing I think I should hasten to add is obviously there could possibly and may possibly be, in the short term or the long term, opportunities to export coal from Nova Scotia that tie into some of our earlier discussions as well as now, on the surface. The

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opportunity for contracts in Nova Scotia is some indigenous coal use in residential Cape Breton, but Nova Scotia Power would be the primary benefactor. The amount of sulphur, there are some limitations there. That will have a degree of influence on how much blending you would want to see and those types of opportunities to look at even more volume instead of less. One may be into a situation where you are asking for a blended coal instead of a single strip to meet the customer's demand.

MR. CORBETT: Again, I just want to go back to holding back, if we can use that term, from accepting the leases, because of, as you stated, environmental remediation concerns, and you want to make sure that the package is finished. To a point, I understand and appreciate it. There's another side that says things are being encumbered by that. There's really no pressure on those, whether you sign off or not. I'm thinking primarily in the Donkin situation where there's been no real mining on that. The only thing that's been done on that site was the two bore holes. There's really no on-surface environmental impact. I guess I'm asking, with that in mind, are you still saying that lease will not be put up for bid or auction or sold, whichever term, until the environmental concerns are all signed off?

MR. FAGE: The reality of surrendering the leases, you can't surrender part of a lease, you either surrender the lease or you don't surrender the lease. Assigning a new lease, if you don't have the lease back from the previous holder, then you don't have one to sign. That's why it's critical to finish one phase before you start the other. The lever here on forcing the federal government to honour their obligation is on the terms of surrendering the lease.

MR. CORBETT: That being fair, I guess where I have a real problem then, Mr. Minister, is that at no point did any provincial departments step in over an area that we would probably say is one of the best heavily polluted of the Devco sites, and that is the coal wash plant, it's called the VJ Plant, Victoria Junction Plant. That was allowed to be hived off and sold separately. I appreciate that we're not talking about leases per se, but we're talking about a Crown Corporation that was allowed to be hived off. If it's a real concern about the environment, the provincial government did not say one word about that. I'm perplexed over that.

MR. FAGE: Again, this has no relationship in reality to the leases. What you're talking about are surface assets owned by the federal government, which are not in any way part of the coal leases. Any regulation dealing with any department in regard to safety or environment, unless another level of jurisdiction superceded it, it would be automatic that those regulations had to be abided by. The federal government owned these assets, they held discussions on purchase and transfer of those assets. They chose to sell them.

MR. CORBETT: I hear what you're saying. If they chose to sell the Donkin Mine, do you feel they have the right to do that?

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[4:45 p.m.]

MR. FAGE: Well, they've been trying to sell the Donkin Mine, shopping it around worldwide, for a number of years. They were unsuccessful. That's why they want to surrender the leases to the province. Obviously, the equipment are the physical assets. Whether the hole in the ground is ownership or worth something at that point is debatable.

MR. CORBETT: I would disagree with you. I think there's been more than interest in Donkin resources. We've met with other groups and you, Mr. Minister. Just one more question, and then I will turn it over to my colleague here, on the area of Dominion Beach. I'm going to switch gears, way over. I just want to give you a chance to give yourself a pat on the back and tell me a whole bunch of good news. What's your department's plan this year for involvement with Dominion Beach, appreciating that I think the minister is aware there are committees in and around - you've met with our committee in Dominion about it and so on. Can you get me up-to-date on where your department is in regard to the beach, particularly any protection from erosion, one of the main things, and then moving forward about any other aspects of the beach you may have?

MR. FAGE: Honourable member, you're absolutely right, it was a nice opportunity for me to visit your constituency and meet with concerned people on that particular beach, and have a chance to see it firsthand. There appeared to be, when we met, an interest in forming a community group, and staff is available to help put that process ahead. Obviously our budgets are not huge or large. The issue of the erosion there is an important one and has to be addressed in some manner. As far as individual allocations of budget, we're looking at priorities of different beaches right now, and Dominion is one we're looking at and considering. Sorry, I don't have an announcement for you here this afternoon.

MR. CORBETT: You let me down again. (Laughter)

MR. FAGE: Did I build you up far enough though?

MR. CORBETT: No lifeline on that beach. (Laughter) I'm going to turn it over now to my colleague, the member for Halifax Chebucto.

MR. CHAIRMAN: The honourable member for Halifax Chebucto, your time is now 4:47 p.m.

MR. HOWARD EPSTEIN: Mr. Minister, I wonder if we can have a discussion about forestry. I would like to turn to a document that I'm sure you've seen, it's the report just done in November 2001 by GPI Atlantic, Genuine Progress Index for Atlantic Canada. This is a local research organization that specializes in looking at economic issues in a particular way, and what they're concerned about is the measure of what they call sustainable development.

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They did a report, a two-volume report, that was published in November called their Forest Accounts. I'm looking at Volume 1, which is called Indicators of Ecological, Economic & Social Values of Forests in Nova Scotia. In the executive summary they make the following statement: "Based on the annual growth rate of the province's forests, on the rate of seeding and planting in the past decade, and on changes in age structure and species composition, the current annual rate of cutting is unsustainable." That's the end of the extract from the executive summary.

I'm sure you've had a chance to look at GPI's report, as have I, and it raises a number of concerns. What's clear is that they take a framework of analysis in which they essentially say that it's not much of a contribution to gross domestic product if what you're doing is the equivalent of a factory owner selling off their equipment and calling it revenue. So if you're depleting what you really need, it's a big mistake in accounting and in economic terms and in common-sense terms to think that this is really revenue. The reason it's a mistake is you can't do it forever, you can only do it for a short period of time until you run out of equipment, then you're out of business. The parallel with natural resources is painfully obvious.

So the key question is really whether you agree with their findings at all, or if you take issue with them. The key issue is, are we overcutting? That's really the question that they raise, and given the answer that they've come up with, backed by their documentation, they've clearly come to the view that the policies that are being pursued and have been pursued here for quite some time are not sustainable, we can't continue to cut at the same rate that has characterized our practices in the past.

I wonder if we can start off by having some reaction from you about this report and their conclusion. I assume that you must not agree with it, because if you did agree with it, something different would be happening in our forests or we would be hearing some changes in policy, but perhaps I'm anticipating. It may be that you do agree with them and changes are afoot. Again, I put it to you, Mr. Minister, they're saying the current annual rate of cutting is unsustainable, is that the view of the department or do you disagree? Could you help me out in understanding why you disagree, if you do?

MR. FAGE: First of all, I think you highlighted it in your opening remarks on their executive summary. It's very difficult when the measuring stick from one report is different from the measuring stick from normal groups or papers that would assess sustainability and viability of the forest industry, the agriculture industry or any other measuring stick the GPI would do. It doesn't mean it's wrong, but it is one that uses different factors than the normal accepted for the analysis. It's a different yardstick you're using, so that makes it very difficult to use their yardstick in comparison to any other study or factors involved in that study that they would use. That's not to say it's wrong.

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Also, your analogy of using up the equipment, I think you and most people have to think of the lifecycle of a forest. A piece of equipment will wear out and rust away or you can sell them; trees and forests regenerate, grow and sustainability is the key. I don't think there's a question in any Nova Scotian's mind out there, certainly not in mine either, that, yes, the supply will not be sustainable unless you take measures to ensure it is. I guess there are two trains of thought, some people would say, if you are doing it as a philosophical question, well, you can stop harvesting and then the supply will be sustainable, and 22,000 Nova Scotians can do something else, and you've achieved that goal.

Other people would contend that well, if we want it to remain sustainable, then we have to make sure that there are proper silviculture practices, and you do an inventory of your forest land. The department did that two years ago or two and a half years ago. That was the AGFOR report which clearly demonstrated Crown land was in a sustainable position, large industrial holders were in a sustainable position, and that private landholdings were not. Subsequent then is beginning the process to correct that. You begin the process by the start not the finish. The start is putting policies in place that promote where you want to go. Not that you don't harvest any more or there are mature trees there tomorrow afternoon on a 40-year life cycle.

Those things, the government has put in place, and they involve everything from sustainable forest practices to a sustainable forestry fund, watercourse protection definition, wildlife, wetlands, mature growth, management plans required, harvest plans required for the first time ever in this province, not only on Crown land but all private land, through those various techniques. That's the beginning, the start of the policy issues implemented, taken from a piece of paper, the academic debate, to the forests of Nova Scotia and the individuals who own those lands, those regulations, those funds, those dollars have been put in place. They're working on that process.

GPI's findings, it's very difficult, as I said initially, to compare them to other studies, because they use a different base of reference. Are their findings wrong? I certainly don't say they're wrong, but I think the important thing is we're heading in the right direction.

MR. EPSTEIN: Very interesting, Mr. Minister. I think you're making very good points and there's a lot that you say that I don't disagree with. Can we just look at the other kinds of measurement that you have in mind, because the only other recent comprehensive attempt at setting up a yardstick or a measuring indicator that I'm aware of is the one that the Canadian Council of Forest Ministers put in place a few years ago. Is that the one you had in mind, the one that set up a system of criteria and indicators of sustainable forest management? Is that the system that you had in mind as a different kind of analysis?

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MR. FAGE: Yes. Exactly. That's one of the ones we're very involved with and putting forward. Other recent ones would be the AGFOR report itself on returns and sustainability and opportunity, those types of ones. But the one you mentioned, we're very much involved with that at the national level and with our counterparts across the country.

MR. EPSTEIN: I was aware of the CCFM criteria and indicators. It just didn't seem to me that they were startlingly different from what it was that GPI talked about. The only difference seemed to be that GPI went ahead and put price tags on some of the different aspects and items that are often referred to as externalities; they attempted to quantify in dollar terms so that there was an attempt made, which they admitted had imperfections but they gave it their best shot. So there was an attempt made to translate into dollar terms their understanding of what it meant, if there were inappropriate steps taken in the management of the forests. I can see you're anxious to say something, go ahead.

MR. FAGE: I think that's why I said I'm not saying their evaluation is wrong, it's different and hard to compare because you're assigning a value to economic types or sizes or systems, you're putting a dollar value on various types of activities or how the resource would be used from an environmental aspect to those types of aspects. I agree with their statement that we have a lot more work to perfect it, and that they're very rough estimates - I think was the actual phrase used - as a first attempt. That's why we're not disagreeing with a number of the recommendations and observations. Actually once you start assigning values, it's very difficult, as they acknowledge, to have the right weight on each value.

The critical part on sustainability is, I think we all acknowledge we have a problem, whatever measuring stick you use. Let's get on with the process that helps correct that. I think, to me, whether you agree with how they assign their values is not the key part, it's acknowledging that we have to get a better system. That report and most private observations and even a national, when you refer to the one I am chairman of, that is what that acknowledges if we are going to be in a sustainable position for the future. We find this afternoon that we all want to be in a sustainable spot 20 years down the road, so what steps do we have to take to ensure that?

[5:00 p.m.]

MR. EPSTEIN: Twenty years and well beyond that, I hope. I don't think there is a serious difference of view. I think the real concern is whether effective steps or enough of them are actually being taken. What GPI actually said was that their work was "very much still a work in progress", and that is a fair statement which they point out themselves. They also go on to observe, though, and this is consistent with the precautionary principle that even if more research is needed and even if it is still an iterative process that there is no reason not to take policy steps in the meantime. Indeed, as I understood from what you are saying, the department already is trying to take policy steps in the meantime and is trying to

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move in this direction, which seems to me exactly the right thing to do. What I was wondering is whether we could just look at a couple of those steps and see where we are.

You pointed, and I think with some justification, to a difference between what goes on with Crown land now and what is going on with private lands. We are all aware of the stats of how much of our province - particularly in the rural areas where it is important and where it has this impact on forestry - is owned privately, so this becomes a very crucial factor. It is not like British Columbia where 91 per cent of the whole province is owned by the provincial Crown. We are in a different situation. So it is important that there be either a willing buy-in by private owners, or that the government set direction.

Before I move off the Crown lands, I wonder if we can have a look at a couple of things about Crown lands before we discuss private lands. What I am wondering has first to do with the stumpage rates. I wonder if you can help me understand how those are set.

MR. FAGE: Since we formed the government, obviously one of the things we were concerned about on a number of fronts was, first of all, as a government, are the taxpayers of Nova Scotia getting reasonable returns on their investment? Secondly, for a number of factors, but primarily our largest market is the United States. As you have seen the softwood lumber issue unfold, clearly it was extremely important that we can demonstrate that we are not subsidizing our forest industry here.

MR. EPSTEIN: The minister knows exactly where I'm going.

MR. FAGE: So those types of factors were extremely important. We commissioned part of that AGFOR study to look at how we can have a reasonable mechanism to keep us current with what is happening out there in private industry. The AGFOR does that on an adjustment basis of roughly every six months. It would trigger what the average current returns are on stumpage fees for private lands; that automatically is the stumpage rate for anybody buying off Crown land.

The other thing there out of the whole volume in the softwood lumber leaving from this province, to give you an indication of how it is mostly private lands that the forestry is generated because once you take the protected areas, our parks, various other designations out, Crown land in relative terms becomes a very small part of that harvestable area; approximately 4 per cent is the amount that would have been off of Crown leases going into the lumber shipped to the United States under softwood lumber.

MR. EPSTEIN: I have to say I am not sure I understood - 4 per cent of what?

MR. FAGE: Four per cent of the volume.

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MR. EPSTEIN: Four per cent of our exports to the United States comes from Crown land, is that what you're saying?

MR. FAGE: That's right, of the lumber. There may be a higher percentage in fibre but of lumber sold to the United States, 4 per cent is the approximate number that would come off of Crown land through lease holdings.

MR. EPSTEIN: In that case, I'm particularly puzzled about why it is that we were hit with any countervail at all, under the American scheme, because if our system is set up in order to mimic the private market and is adjusted at six-month intervals, why is it that we were hit with any countervail at all?

MR. FAGE: We weren't, we are exempt from the countervail, it is anti-dumping.

MR. EPSTEIN: It is anti-dumping then. So why were we hit with that?

MR. FAGE: Because it was an arbitrary ruling by the United States of a degree of hurt that they considered to their industry. They assigned the number. It is roughly 9.2 per cent that they assigned to Atlantic Canada and in combination with the other two, because they couldn't achieve an agreement with the remainder of Canada, it is 29.6 percent, I believe.

Yes, we have an agreement, we are exempt from the countervail. What we are faced with is actually anti-dumping, which is a ruling imposed by the United States which is their feeling. Some would say it's based on some stats, but I think it's based more on how you feel this afternoon and they assign you a number.

MR. EPSTEIN: Well, I hope the U.S. commerce department is paying attention to how we feel here. Okay, it really is a puzzle to me.

Let's go back to this question of adjusting the stumpage rates every six months. Is that true of all the Crown leases, or are there some that, for example, were longer term, that had a stumpage rate set that would apply for a longer period? Are there any that are exempt from that system that you just described as having its origins in the AGFOR report?

MR. FAGE: What would be exempt would be - and I shouldn't say strictly exempt, but the one we have to negotiate on is the two industrial releases which are separate from the lumber leases, that would entail smaller mills and operations. Those two industrial leases were required for adjustments to have discussions and negotiations. We are currently in that process where we want to get them on the same schedule of a readjustment every six months. We are in those talks and discussions with the two industrial holders right now.

MR. EPSTEIN: Do they have a set date at which they expire?

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MR. FAGE: The two industrial leases?

MR. EPSTEIN: Yes.

MR. FAGE: I would have to check the legislation but I believe both of them (Interruptions) One is 99 years, and I will check for you but I think it was a slightly shorter time frame for the other one. Really, what you have is automatic renewals every 10 years, is how they are set up.

MR. EPSTEIN: This is more for fibre than for lumber, is that right?

MR. FAGE: That's correct, yes.

MR. EPSTEIN: So when you were talking stumpage before, you were talking lumber, not fibre?

MR. FAGE: Absolutely, and that was the exception I was making there.

MR. EPSTEIN: But those two large industrial leases, those are fairly large pieces of territory, as I recall. It's been awhile since I've looked at that legislation but, as I remember, they're fairly extensive pieces of land. Is that right?

MR. FAGE: Yes. There's no question. The exact size, the two in total - we can give you the exact - would be close to 1.8 million acres. The other thing I probably should note too is the form in which they accept wood has changed quite dramatically through the years. Those mills primarily bring their wood source, instead of wood stock, now bring it in as chips. So the fibre in some operations is either chipped on-site in the woods, or if they had sellable sawlogging material they were harvesting, they would trade off their fibre requirements for chips coming from an operation that just dealt with sawlogs, let's say, which is the common practice. The rough number is about 30 per cent of any piece of roundwood is going to be sawdust and chips when it's processed for sawlogs. So one of the primary sources of those two large pulp mills now for accessing their fibre is in the chip form and that's one of the avenues they would acquire it with.

MR. EPSTEIN: One of the difficulties that it seems to me you must inevitably run into is trying to establish what the appropriate rate would be for the Crown lands that are intended for fibre because there's no competing private market, I suppose. Or is there anyone that you can use as a measure?

MR. FAGE: There are certainly a number of other outlets. If you are in private, again, the normal rule would apply to you. If you had a tree, let's say, or a long piece of wood that's an entire tree, a portion of that would make a sawlog. Another portion of it that wouldn't be suitable for that, it would be too crooked or may have rot in it, would be suitable for

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pulpwood, as long as it's chipped, and that would give you a suitable measure from the private sector. As well, the pulp market in Atlantic Canada stretches from here to the other end of New Brunswick, so you would have competing mills from other provinces.

MR. EPSTEIN: There are private sellers in Nova Scotia who would sell some of their chips to pulp and paper plants in New Brunswick?

MR. FAGE: Maybe not specifically chips. They would sell roundwood pulpwood. There are extensive volumes of roundwood pulpwood that would move to other mills in New Brunswick, no question. There's a private sector for that.

MR. EPSTEIN: So do they get a better price than the Crown is getting?

MR. FAGE: They would bid and, again, remember these are the two long-term contracts in negotiations right now.

MR. EPSTEIN: Yes, but my point is, what's the measure? When you're going into negotiations, you have to know what you want.

MR. FAGE: Obviously what we're looking at is what is the market out there. That's where we want to move to, where you are on the same basis as everybody else. So we look at every six months and adjust. We would like the same rule to apply to them for their fibre and that's the market you would measure them against.

MR. EPSTEIN: I agree. So I take it then that a private seller who might sell, for example, to New Brunswick is doing better than the Crown is doing under the long-term lease.

[5:15 p.m.]

MR. FAGE: Under the long-term lease, it's a set amount. Yes, there is no question, if we can generate more revenue by going to this, this is why we want to get there.

MR. EPSTEIN: That's fine. I'm encouraging you to do that. So that's one part of it. I just wanted to make sure it's up and not down that we're looking. That's fine. And also, that there's a reference point outside because what had always concerned me was that given the geographic positioning of the pulp and paper plants that we have in Nova Scotia, it doesn't really tend towards a competitive market within reasonable haulage distances. The plants are located so that, essentially, they have an area that they would naturally tend to draw on. Now, clearly, there's going to be a little bit of overlap around the margins, but it's not exactly an active competitive market when it comes to the provision of material for pulp. I guess that's the problem.

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MR. FAGE: That is another outside market that's not connected with those two, that roundwood that's absolutely destined for pulp chips. That gives you another benchmark to establish that price against.

MR. EPSTEIN: Getting back to the dispute with the United States, is there any place then in the system that you want to put in place in Nova Scotia for auctions? This has certainly been talked about in other parts of the country as being the kind of system that might be appropriate. So would it be desirable, for example, in terms of our management of Crown lands, not to have long-term leases, regardless of what it might or might not say about six-month adjustments? Would it be desirable to have auctions on a regular basis or not?

MR. FAGE: We're in a different set of circumstances here. There are two things that I would like to comment on. First, the Maritime Lumber Bureau represents the interests of the industry in Maritime Canada, so we work very closely with them because that's a membership that represents the industry and their negotiating position. So we would work in conjunction with them on the trade issue specifically. Secondly, there are no long-term leaseholders other than the two industrial contracts in our province. So adjusting the price to the market price every six months, the American lumber coalition has supported us in our bid to be exempt from countervail because they feel they're not disadvantaged and they are dealing under the same basic system that we do.

MR. EPSTEIN: So part of the problem in terms of setting up an auction system here is that there just aren't enough bidders?

MR. FAGE: I think if you set up an auction system, certainly there would be interested bidders in Nova Scotia. There would be interested bidders probably outside of Nova Scotia. There would probably be a huge amount of interested bidders from south of the border that certainly would like to move roundwood south of the border and do the processing there. Probably from an industry perspective, and certainly from our perspective, one of the things we would be extremely cautious of is a system that doesn't allow us to maximize the value added here in Nova Scotia and thus employ people here in Nova Scotia, especially when the industry has the support of the American industry and is countervail exempt. It would create certain problems.

MR. EPSTEIN: I think I follow what you're saying. Let me just ask it another way. If you weren't encumbered, if the Crown wasn't encumbered by long-term leases with those two major industrial leases, and if the 1.8 million acres was just in inventory and you were looking at a desirable system to attract potential purchasers, would you then be thinking about an auction system or would you then be thinking about the AGFOR system?

MR. FAGE: Well, the actual process right now is, if a piece is coming up, it would be tendered and people who were interested would apply here in Nova Scotia now. You also have the situation, because we do no long-term leases outside those two industrial contracts,

[Page 491]

a company that has tendered and has been successful on a small area may desire to renew that tender and so you have that situation. Then you would have the situation that there would be an area that was suitable for harvesting, then that tender would go out. That's the system we use.

MR. EPSTEIN: I think I followed that, thank you.

MR. CHAIRMAN: You have seven minutes left to your time, please.

MR. EPSTEIN: Can we then move to a discussion about private land and the problems associated with that. I thank you for your comments about Crown land. What I wonder is what degree of confidence you have about inventories on private land. Do we know enough about what is actually going on on private land and, if so, can you tell me how we know it?

MR. FAGE: The last measurement of what was going on on private lands was the AGFOR report which we had commissioned. The AGFOR report is clear that private lands are not in a sustainable position in Nova Scotia. Most times when you would drive through rural Nova Scotia and you would see an area that had been harvested, or people would phone into the department concerned that was on private land, that's not by sheer volume and management plans and harvest techniques Crown land that people would see throughout this province as they drive the highways and byways.

Clearly with that in mind it was indeed time to move quickly, and that's why the Sustainable Forestry Fund was established, and reforestation funds and harvest plans were all committed as well in February. That's why the government and the department brought forward the issues in regard to watercourses, stream banks and wetlands for the first time ever in this province; it was a code of practice basically on Crown lands and a management option or a desire on private lands for the first time ever in the history of this province. Those regulations now are the law on private lands and going in dollar value from $3 million a year ago, with that Sustainable Forestry Fund, to the actual of $10.7 million, which is a great start. But I agree with you, it's only a start.

MR. EPSTEIN: It is only a start and that's really the main point.

MR. FAGE: We've taken a step.

MR. EPSTEIN: Absolutely, and I would say the right step. I have to say I think that's right. I don't know if it actually was the first time, I mean I think there was legislation, what, 30 years or 40 years ago that prohibited the cutting of trees below a certain diameter. Did that not apply on private land as well as Crown land?

[Page 492]

MR. FAGE: Yes, the actual diameter of trees, there was an Act where you could only cut, at one time I think it was 10 inches and it got to six inches or eight inches and then was abandoned.

MR. EPSTEIN: Yes.

MR. FAGE: At that point, I think you have to remember the dynamics, this was only a sawmill industry province. What's out there right now is getting the most utilization out of a species along with volume and price and those types of things. So the actual usage of all material coming out of our forests, probably close to 50 per cent is for lumber, 50 per cent is fibre - from paper to a composite board to all the other types of uses - and that's where it's very hard to design a forest for only lumber production when the actual usage in the marketplace is a 50/50 split.

MR. EPSTEIN: Well, I think it is. I guess my point simply was that regulations, not just guidelines but regulations, things that are actual law and that control cutting or methods of cutting on private land were not unprecedented in Nova Scotia. I remember that it might even be four years ago, it might be as early as 1998, it might have been 1999, but I think the first time you, as minister, brought in some regulations to deal with cutting and it was on Crown land, I remember being somewhat concerned at the time because of some of your comments that suggested that regulations on private land were not something that you favoured.

I want to say that whether you favour them or you don't, to have taken the step to move towards regulations on private land is the right thing. Unfortunately, it's like any other public policy problem. Even if you can agree on where you want people to move to, the problem is how do you induce them to move in that direction. Sometimes it takes money inducements; sometimes it takes money disincentives, like taxation sometimes; it takes education; sometimes it takes actual rules; and often it takes a combination of all of those tools. So I think you have taken the right steps now to begin to move in that direction. I hope we're not finished with those steps.

I know we're almost finished, I'm wondering though if you have any other steps planned in terms of regulation, again on private land.

MR. FAGE: I couldn't agree with you more. It's a combination of those four you listed, but the other key element is the time element; it's always the fifth element and it's a critical one. At this point there need to be other things done, no question, on Crown and private lands, but I think as we go through this coming year, it's one of consolidating the progress that has been made and then moving on to other regards. It's educating people in regard to stream banks, in regard to representative samples, no more clear-cuts, you have 0.53 of a hectare and you have to do that. This year is consolidating those again so to speak, I would anticipate.

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MR. EPSTEIN: I think we're out of time.

MR. CHAIRMAN: Yes, your time has expired. I believe there's a question here on the government side, just a couple of brief questions, and then we'll go back to the Liberal caucus.

The honourable member for Colchester North.

MR. WILLIAM LANGILLE: Mr. Minister, I was just listening to the member for Halifax Chebucto and he asked you a question about all Crown land and I believe you answered him by saying all Crown land has to be tendered. Is that correct?

MR. FAGE: There are the two large industrial contracts, but any time there is an unencumbered piece, it would be tendered. If there was a renewal on a short-term lease that is already there to a specific company, obviously, if they're willing to meet the terms of the current price, but that tender never includes the land. This is the tender on the stumpage. Remember, even in industrial contracts, the province owns the land.

MR. LANGILLE: I realize that. So what you're saying is if you're under contract now, of course, you don't have to tender, but any new land that is Crown-owned that you sell the stumpage off, including select cutting, it has to be tendered?

MR. FAGE: Yes, it's always tendered and that's if it's not encumbered by somebody who has already got a current lease there. Let's say they were renewing their tender - just so people don't get confused, if you were a company that had a particular bog that you already had the tender on and these are short-term tenders, the three years, the five years is up, as long as you're willing to meet the terms of what the current price is, you would be automatically renewed that tender on that piece.

MR. LANGILLE: I'm not talking about a piece that is already tendered out, I'm talking about a piece that's not, that's Crown-owned, no leases on it.

MR. FAGE: That's the normal practice.

MR. LANGILLE: So it has to be tendered?

MR. FAGE: Yes.

MR. LANGILLE: And the reason I'm asking . . .

MR. FAGE: I would qualify it, that's a policy in strictly the terms, it doesn't have to be, but that's the policy.

[Page 494]

MR. LANGILLE: Well, about an hour ago I got off the phone with a Mr. MacDonald who seems to think that he has the way paved already for a select cutting without the tendering process and I guess that's where he was going. But I was under the assumption that everything had to be tendered out, but it doesn't. I'm getting a bit confused here.

[5:30 p.m.]

MR. FAGE: Again, as I said, the normal policy would be tendering. That doesn't mean that's what you have to do in every case. Various proposals from time to time would come forward that you could consider under other obligations and circumstances, but the normal is, if we've got a block of mature spruce or some hardwood or whatever, it would be tendered. That's the normal. There are times where because it is our policy to encourage too, that you would entertain another proposal. It doesn't mean you can't. That's normally what we would do.

MR. LANGILLE: I'm concerned about non-tendering and of course, as you know, I'm always concerned about our secondary industries in Nova Scotia. I understand we're shipping hardwood out in the form of veneer but not finished veneer to Germany, who in turn has a contract with Home Depot, they finish it in Germany and contact Home Depot. I guess my concern is, why do we not have a veneer plant here? How can they ship it to Germany, finish it, ship it back, and sell it back here?

MR. FAGE: As a province we look for opportunities to value-add and secondary processing. The key component is industries or businesses that want to locate here or start that type of production, and certainly if somebody is looking at veneer, from a resource perspective, we would have our input, other government departments would look at it as well, but it's not a state-run industry, the industrial side in this province, it would be a proponent that would either want to locate here or begin a facility like that.

MR. LANGILLE: I guess that's where I'm going, because if it makes financial sense to a country that has no hardwood per se to manufacture, which is 1,000 miles away, and they ship it 1,000 miles back in a finished form, why wouldn't it make sense for them to locate here?

MR. FAGE: There obviously would be a whole host of factors, from volume to markets where they sell and those types of things. We have several companies here in Nova Scotia on the hardwood side that would be suppliers of finished product or sawn product to the German market. They would have their representatives here looking at stock and production to buy in this province, as in semi-finished product coming out of here. There are several operations that supply them. The issue of one of those companies locating here that want to do veneer or finished product, we would be more than willing to talk to them if they approached us. Again, that's those companies' opportunities. I know, certainly trade missions to various areas around the globe, our representatives would promote opportunities like that.

[Page 495]

It's up to them to decide whether there's enough volume here or the opportunity is here to do it.

MR. LANGILLE: I'm looking at hardwood. Now there are certain areas in Nova Scotia that have hardwood hills, which are beautiful hardwood hills. I know that Kimberly-Clark is clear-cutting. In fact they're clear-cutting in such a way that you can see the clear-cut from the highway. Now they're clear-cutting, I believe they're making pulp out of hardwood now. They've refined it so they make pulp out of hardwood. As you know, once your hardwood is cut, naturally the softwood grows up in the place of hardwood. I guess it's a concern to me, especially where I live, to see this kind of clear-cutting of our hardwood, especially where we own as a province Crown land bordering Kimberly-Clark. I use Kimberly-Clark as an example because that's what I see, and Stora too.

MR. FAGE: First of all, they're required to submit a harvest plan that the province would agree with, on the method or how much they would harvest. Certainly I know if the viewscape is one of the considerations under the IRM, then the density of the cover that they would have to leave or the amount of trees, in reality, would have to be enough that it wouldn't impede the viewscape and the hill would look proper. In the particular area you're talking about, I haven't seen this and I don't know what management plan was approved for that area.

When you look at the opportunities for private, on hardwood, in Nova Scotia, it's part of that delicate balancing act of the various use holders for Crown land in Nova Scotia in those competing interests. On the production side of it, the vast majority of land in Nova Scotia is owned by private interest as a percentage. A lot of that growth in production and opportunity will come from that private on the supply side of the resource. Our job, and it's not an easy one, as a province is trying to find that balance.

MR. LANGILLE: I realize that too, Mr. Minister. I know that right in behind my place, there's a lot owned by a doctor in Germany, this 228 acres, which they cut about 180 acres off, Stora just did. They left a few trees, sparsely, throughout the area, and most of them have blown down now. Also, I gave them an access route through my property, which is 45 feet wide, in front of my residence, but I left a 50-foot spruce buffer. That wind last November took out the causeway, and it took down pretty well all my trees. It looked like pick-up sticks, even with a 50-foot fir and spruce buffer. I guess I'm wondering about these trees, so many per acre, that you're leaving. How are they withstanding when they're on the side of a hill?

MR. FAGE: Again, the harvest plans approved required the IRM, the principal concerns there to be addressed on cover. Certainly under the new regulations that just went in a month ago or a month and a half ago require that representative samples be left, they can't be scattered trees. They have to be self-supporting clumps and islands that aren't as

[Page 496]

susceptible to that blow-down. There is always a weather condition that can cause a huge amount of problems, there's no question.

MR. LANGILLE: Does that just apply to Crown lands or to private lands?

MR. FAGE: That began in February, and for the coming year that applies to all land, private and Crown.

MR. LANGILLE: In this coming year only?

MR. FAGE: It's in effect now. The law was passed January 28th, I believe, or it became effective. Since January 28th of this year, those are some of the new changes that are so important to sustainability. Those aren't guidelines anymore, that's the law on private and Crown land in Nova Scotia.

MR. LANGILLE: I guess this was cut last August, so it doesn't apply.

MR. FAGE: Yes.

MR. CHAIRMAN: Your time has finished. Time for the Liberal caucus. Your time is now 5:38 p.m. Just to advise members, our time will be running out here tonight at 6:00 p.m. I understand, Mr. Minister, you will be away tomorrow, so you won't be back here until Monday night.

MR. FAGE: That's correct.

MR. CHAIRMAN: We will have Tourism in here tomorrow. So if you don't finish with him tonight, it will be carried over until Monday.

The honourable member for Lunenburg West.

MR. DONALD DOWNE: I want to start off with just some local questions, Mr. Minister, as I have every year. But I first want to welcome your staff and continue to state how lucky you are to be minister of this particular department, one I have a great deal of respect for and the professionalism of the staff, as well as the dedication of the staff for the areas that affect so much of the economy and the community of the Province of Nova Scotia. I might say that your deputy has a name that would scare everybody in this caucus pretty quickly if they didn't know who it was for sure.

MR. CHAIRMAN: Should you clarify that for the record?

MR. DOWNE: No, I'm only joking. (Interruptions) From my experience they're both fine gentlemen, I will leave it at that, and we're honoured to have both of them.

[Page 497]

The first question has to do with Crescent Beach. As you know, each year I've been asking, and the Friends of Crescent Beach continually ask me and request issues to be brought to your attention. One area, again, is the issue of portable potties at the beaches. I know the department has worked very hard over the years to try to provide that. My question to you, Mr. Minister, would we be able to have those provided again this year for the Friends of Crescent Beach in the same locations as last year?

MR. FAGE: Yes, it's our intention to provide that service this year.

MR. DOWNE: Thank you, Mr. Minister, I greatly appreciate that for that community, part of the community. The other one is Rissers Beach. It's a campground. There was some work done a year or two ago with changing the gate entrance and I think the new facility has worked out very well. Have there been any plans to do any improvements to that particular park? I understand it's very well utilized. Revenue is reasonable there.

MR. FAGE: I apologize, I can't give you anything definitive, we're looking at that particular beach and a number of others on our capital side. We haven't finished assigning the dollars to where they will be spent this year on that particular one, but it's on the list.

MR. DOWNE: It's on the list, we just don't know where it is on the list?

MR. FAGE: We are going through the list of our beaches or parks in every region in Nova Scotia and, as you know, the budget is not large, but it's examining each one for needed work or priorities and which ones where the dollars will be allocated and we just haven't finished that process yet.

MR. DOWNE: Mr. Minister, would you have the information in regard to how each campground is done in regard to dollars back to the province?

MR. FAGE: I have totals for regions and then I have the individual parks.

MR. DOWNE: That would be great if I could have that. Could I have a copy of that?

MR. FAGE: Certainly, yes, no problem.

MR. DOWNE: That would save time and save going through each one. Do you have year to year? I mean, do they have a trend?

[Page 498]

[5:45 p.m.]

MR. FAGE: Yes, I believe we began it a couple of years ago, so I think we can supply you with two or three years. You would probably be pleased to know that Rissers for the record on the cost-recovery percentage is 115 per cent, so it recovered 15 per cent more than was expended there. It's one of the ones that's above 100 per cent.

MR. DOWNE: Yes, I heard it had done reasonably well and it would be great if I could have that.

MR. FAGE: Actually I think it's the highest, honourable member.

MR. DOWNE: The only thing I will say, Mr. Minister, is that it's starting to look a little shabby around some of the edges there. It's starting to look like it needs a little bit of work. It's starting to look a little shabby and I know the staff, they all try to keep the place as clean and as good as possible, but it is one where we have a lot of European visitors; it gets a lot of American, European and Canadian visitors. It's really a showcase as are most of our parks, but it's a great showcase.

MR. FAGE: One thing I might add that would be helpful, I think we should probably supply you and other members with the entire campground report because even the information like that from destinations is broken out. It's really quite an extensive report that correlates from Europe, the U.S., and is very useful to everybody.

MR. DOWNE: Yes, I have seen some of the correspondence from people and they were extremely positive and some of the staff show me letters if I'm there. I try to drop into different parks. I know the other one in Chester is also well received and well appreciated. Are there increases in the district budgets from across the province this year?

MR. FAGE: You're referring to the regional budget?

MR. DOWNE: The regional, can you give me the breakdown of the budgets for each of the regions?

MR. FAGE: While we're looking up those specific numbers, I would point out that the service associated and obviously a number of staff members with the Surveys Division for the entire province would be the only change from the previous year. (Interruption) Sorry, we don't have those totals with us broken out by region, but . . .

MR. DOWNE: Another day if they have them.

MR. FAGE: They're in the book.

[Page 499]

MR. DOWNE: I know they are, but I just thought they might have them already added up by region.

MR. FAGE: Sorry, we can do that.

MR. DOWNE: Well, that would be nice, it would save me a lot of time.

MR. FAGE: But the change on year over year would be the nine positions across the province with the Surveys Division.

MR. DOWNE: What I'm trying to find is if the regional budgets are basically the same. The nine staff that are going to be taken, I understand that's going to be spread equally across the board. So, theoretically, there are four regions?

MR. FAGE: Three regions.

MR. DOWNE: It would be three staff per region, so it should be fairly consistent.

MR. FAGE: Yes, reasonably consistent. The reason I was just hesitating, it was running through my mind that some regions have more survey crews than other regions. So it was based on the number of survey crews rather than the regions through the province, but it makes them roughly equal. We will get them to you in a minute.

MR. DOWNE: Mr. Minister, I noticed in your budget you are setting money aside for the purchase of, I assume, a helicopter, replacing one of the helicopters. Which helicopter are we replacing and how long will it be?

MR. FAGE: It's one of the smaller ones. I apologize, I don't have whether it's a new one or whatever.

MR. DOWNE: That's still in service now, the one we're replacing?

MR. FAGE: Yes.

MR. DOWNE: So we have full air service?

MR. FAGE: What we're doing is the machines are all active that are in service right now. We will get a brand new one this coming year that will replace one of the smaller ones.

MR. DOWNE: It is this year?

MR. FAGE: Yes.

[Page 500]

MR. DOWNE: So the money that's allocated for this year is the amortized capital expenditure for the purchase of that helicopter?

MR. FAGE: That's correct.

MR. DOWNE: So what is the purchase price of the helicopter?

MR. FAGE: I understand that what has been allocated, approximately, to cover the purchase price is approximately $1.5 million.

MR. DOWNE: It is $1.5 million for the purchase of a new chopper. Is that a ballpark figure?

MR. FAGE: That's for a new chopper, minus the trade-in value of the one it will replace.

MR. DOWNE: I can say that from my experience and the analysis that was done that I recall, air service has been an asset to the province and has saved us money long term. One only has to add up the cost of last year's cost that we privatized it, and not that I'm opposed to privatization as such, getting value for money, but I think you are getting value for money in the air service. The flexibility of being able to provide not only services for wildlife and conservation measures and so on and so forth, but just to have the ability to be able to fight fires and also search and rescue and things of that nature. It has a multiple of assets to it. I support the retention of that service and the capital required for that helicopter.

MR. FAGE: I couldn't agree with you more. I think it's very cost-effective. There are certainly opportunities for some services to even go to the private sector. The work we've done would correlate exactly with your work and observation that this one is cost-effective for us.

MR. DOWNE: You might not have everyone in Cabinet agreeing with you on that, but when you get the numbers and throw them out, it doesn't take long to prove that it's worthwhile. (Interruptions) That can wait until next week, deputy. I don't need it tonight.

Back to campgrounds. Is there any plan to increase the rates to campgrounds in the province?

MR. FAGE: We increased them last year. We aren't looking at increasing them this year, because we adjusted them last year.

MR. DOWNE: Is there any consideration to extend the shoulder seasons? We did that once. Is there any consideration to do a longer season?

[Page 501]

MR. FAGE: On specific parks, yes. Last year, some of the high volume ones, we did that last year and we will be looking at doing it again this year.

MR. DOWNE: How many parks do we have in the province, Mr. Minister?

MR. FAGE: We have 22 provincial camping parks. We don't have the total active number right here with us. We can supply that, but on the camping ones, we have 22.

MR. DOWNE: Mr. Minister, there has been a lot of talk lately about Kimberly-Clark and the concern about the power rates. I realize there are other portfolios there, but I also realize, as a former Cabinet Minister, Kimberly-Clark is as important to you as it is to me, as it is to the Minister of Economic Development. In fact, I think you're in a portfolio that creates as much wealth, if not more, than most other departments in the province. So can you tell me what you've been able to do so far to help deal with Kimberly-Clark's situation at this point?

MR. FAGE: If I may ask, I think you're referring to Stora, not Kimberly-Clark?

MR. DOWNE: I meant Stora. I apologize.

MR. FAGE: They're a concern too, but . . .

MR. DOWNE: It's been a long day, Mr. Minister.

MR. FAGE: . . . the one that's been in the headlines a little more has been Stora and, certainly, yes, we've been in contact with them and they've been in contact with us. I guess Stora is certainly concerned about every one of their cost factors, and the industrial power increase that Nova Scotia Power has proposed and gone before the URB has kind of triggered, in discussions I've had with them, their looking at every cost structure from the raw material supply to power rates, right down to municipal taxes and, obviously, they are in discussions with their labour force on how they can be a little more cost-effective and competitive.

The markets certainly haven't been overly kind, especially since September 11th. There was softness in that high-gloss, high-end market for magazines and that industry has tailed off for the demand of late months. So there are a number of issues there related to what return they get out of the market. So they are going back and looking at ways they can lower their costs. We're involved with them in having discussions on the ones that we would have input on at this current time.

MR. DOWNE: Mr. Minister, can you explain, have you met with Stora and have you been able to deal directly with the Minister of Economic Development to see what options we have to deal with Stora's viability?

[Page 502]

MR. FAGE: Currently there's an intergovernmental department committee set up dealing with the issue. The Department of Economic Development is the lead. We're involved on two fronts, as you noted earlier, on the energy side and on the supply side. I was just made aware that next week - so far it has been officials and telephone conversations - the managing proponents will be in with ministers involved for a face-to-face meeting to continue with those discussions.

Your request on the surveyors, giving the number of units there, actually it is done by region. The western region is two positions, central is three positions and eastern is four positions, for a total of nine on the survey crews. That's on a basis of 10 crews in total throughout the province.

MR. CHAIRMAN: Thank you, Mr. Minister, time has expired for debate today; we have our four hours in.

Tomorrow the minister is going to be out of town, so we will be reconvening with the Department of Tourism and Culture tomorrow morning and we will be reconvening with the Department of Natural Resources on Monday evening. So we stand adjourned.

[6:00 p.m. The subcommittee rose.]